July 13, 2011

Netflix Raising Prices


In an announce­ment that angered a great num­ber of peo­ple, Net­flix has announced that they will be redo­ing their pric­ing plans.  Cur­rent­ly users are able for $9.99 to get 1 DVD and unlim­it­ed stream­ing.  Net­flix, start­ing in Sep­tem­ber, will be sep­a­rat­ing the two ser­vices.  The new pric­ing scheme is such 1 DVD out for $7.99 or unlim­it­ed stream­ing for $7.99 or both for $15.98.  This state­ment led to out­rage because users were furi­ous with the fact that they had to pay more mon­ey.  Net­flix is also in the process of rene­go­ti­at­ing their stream­ing con­tracts and as such sev­er­al stu­dios have pulled their movies from Net­flix instant stream­ing.
While I don’t like the price change I think peo­ple need to look a lit­tle deep­er into the price increase.  Most peo­ple think “I’m just steam­ing a mov­ing how much can it real­ly cost” and the answer is… alot.  First there is the band­width required to deliv­er stream­ing ser­vices to every­one who wants to watch it and some­times on mul­ti­ple devices.  Band­width isn’t cheap in mass quan­ti­ties that would be required to serve users across the world.  Cur­rent­ly Net­flix uses lev­el 3 com­mu­ni­ca­tions for all of their band­width needs and they prob­a­bly use a good por­tion of that com­pa­nies band­width.  The band­width alone prob­a­bly costs the com­pa­ny over a mil­lion dol­lars a month just to keep data flow­ing to con­sumers.  That’s $12 mil­lion dol­lars a year.  That’s not chump change by any mea­sure.  Then in addi­tion to this they have to pay licens­ing fees to movie stu­dios to have the right to show their movies online.  When Net­flix first start­ed offer­ing this ser­vice they got a steal on licens­ing because no one real­ly watched movies online.  Now, how­ev­er, there are mil­lions of peo­ple who are using the inter­net to watch their movies and movie stu­dios know that they can make a killing and as such they are going to raise those costs.  Lets take the aver­age TV show for exam­ple, it costs net­flix around $100,000 to $1,000,000 per episode to have the rights to stream any giv­en sea­son.  Lets take Star Trek: Voy­ager, it has 100 episodes, that’s $10,000,000 just to have the rights to stream that to con­sumers and thats only one show.  Mul­ti­ply that by the hun­dreds of TV episodes they have avail­able and you get an idea of the immense cost of oper­at­ing that kind of busi­ness.   Those costs have to be paid for some­how and if movie stu­dios and band­width pro­vides raise their costs so does Net­flix, it’s just sim­ple busi­ness. 
What do you guys think?

5 comments

  1. ScrotusKilmystr - July 14, 2011 3:58 pm

    I can under­stand the increase BUT how they are treat­ing the sub­scribers is wrong basi­cal­ly telling us to ‘deal with it” they need to get bet­ter con­tent on line to keep exsist­ing sub­scribers, like me, and to stay com­pet­i­tive with oth­er ser­vices like Ama­zon…

    Reply
  2. Rachel - July 14, 2011 9:11 pm

    I love Net­flix and I don’t mind an increase because I watch it so often. I think the most I would pay would be $15 a month for it.

    Reply
  3. thsoundman - July 14, 2011 9:14 pm

    That was my thought exact­ly. 15 dol­lars a month isn’t that much. Thats real­ly not that much at all real­ly when you con­sid­er how much peo­ple cur­rent­ly spend on TV. If you have medium/top tier cable pack­ages your going to be spend­ing around 100 dol­lars a month… maybe 70 if your on satel­lite and thats if you don’t have any movie chan­nels. Movie chan­nels can run you $15 dol­lars a month per chan­nel so you can eas­i­ly get your bill up to 130 dol­lars with­out think­ing about it. Net­flix is a measly 15 dol­lars a month and thats if you need both ser­vices. PEr­son­al­ly I only use the stream­ing so it works per­fect­ly for me and then I sup­ple­ment that with Hulu and it costs me a grand total of $15 dol­lars a month for damn near every­thing I want except for sports.

    Reply
  4. thsoundman - July 14, 2011 9:41 pm

    I should also bring peo­ple back 10 years to the era of block buster… remem­ber rent­ing movies from their? 3 day rentals at $6.99 plus if you brought the movie back it was at $6.00 late fee. You could spend $14 in a day and only get two movies. With net­flix you could poten­tial­ly get 30 movies a month. The cost to ben­e­fit ratio is sky high and that does­n’t even include being able to stream them over and over again when­ev­er you like.

    Reply
  5. Tibia Guide - January 21, 2012 1:48 am

    It is just tak­ing over, but as for block buster all the local stores are pet­ty much out of busi­ness

    Reply

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