Thursday, September 15, 2011
Netflix Customers Flee Price Hike
The reason why Netflix became so popular was because of its price. It was a low cost alternative to renting pricey movies at stores like Blockbuster. Netflix managed to put many Blockbusters out of business, and even had a public escapade with them that showcased the movie industry's movement into the 21st century. But is Netflix dooming itself? Over the course of three years, Netflix stock rests at about 170 dollars today. Investors saw the potential the company had and contributed to its blossoming progress in the competitive market. Now, Netflix has proposed a 60% increase in its prices, scaring away thousands, if not hundres of thousands of customers. Before, the company was known for its mail-order DVD rentals; slowly, the company replaced this method with the newest craze, internet video streaming. However, owners of movie production companies saw this as a valuable opportunity to raise prices on the licensed distribution of its movies, causing a chain reaction that steadily forced Netflix customers to fork over more cash. As we know, raising prices also shifts the demand curve. Has Netflix just shot itself in the foot by deciding to raise prices despite the horrible economy? Maybe it is time for a new company to emerge in this time, so as to increase choices within the competitive market, which would benefit us as consumers.
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7 comments:
A 60% increase in prices is a lot, and I think Netflix is not doing itself any good by raising its prices this much. I understand that it appears somewhat necessary for the company to remain successful, seeing as it was forced to spend more money on movies for the website. However, I do not think that such drastic of a price increase will help. Maybe a smaller increase would be better.
I definitely think that raising its prices will not be good for business, especially with the new method of internet video streaming. If anything, i think it will encourage consumers to turn to the "black market" of videos; pirated movies, or websites where the video rights have been infringed but are still watchable. I've watched whole seasons of TV shows on sketchy websites with Korean subtitles... but it works. And it's better than paying ridiculous amounts of money for something that you will only watch once.
I agree with Taylor and Jamie. I feel that Netflix shouldn't focus too much on gaining as much profit as they can because there is a sufficient amount of alternative ways for people to rent movies. I think that if Netflix goes through with this proposal, then competitors, especially Red Box, are going to reap the benefits.
Even if they do raise the prices, I don't believe that it should be a 60% raise. Although the company may see it as an opportunity to gain more profit due to high demand, ultimately there are definitely other companies out there that can supply just about the same thing. Lately I've seen many red boxes and other quick pick-up dvd "vending machine" at different grocery stores. I think Netflix should consider just continuing to build a strong base of customers and grow steadily like that.
Agreeing with what everyone else has said, I don't think Netflix is doing itself any good by raising prices, especially raising them 60% at that. With so many other alternatives available for consumers to use to view movies or shows, especially free options on the internet, Netflix is definitely not luring customers in with the price increase. I think Netflix could potentially increase prices without too much of a dropout from consumers, but the increase would have to be modest and generally acceptable, not anything as high as 60%.
My family subscribes to Netflix and we recently received the letter in the mail saying that we are going to have to start paying more if we want the same service. It is sort of annoying because it is the exact same service so the price increase feels unnecessary. I realize that Netflix needs to raise its prices because their costs have increased and they still need to make a profit. I feel like a smaller increase in price would have been more reasonable and understandable.
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