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Why David Pogue is Wrong and Netflix is Still a Great Value
David Pogue recently wrote an article about Why Netflix Raised It’s Prices. He voices his dissatisfaction with Netflix’s recent subscription fee increase while on the hunt for an answer to why. However, Pogue fails to see the benefits for Netflix users and the business need for the change.
Pogue: “Now, if you want to check out one DVD-by-mail at a time, and enjoy unlimited streaming of Netflix’s 20,000 TV shows and (mostly older) movies to your computer, phone or Blu-ray player, you have to pay $16 a month instead of $10.”
20,000 TV shows and movies available basically anywhere you have an internet connection for only $16 a month. Call your cable/satellite provider and ask them for that deal.
Pogue: “I’ve read it five times, but I have no idea what that means. How does a 60 percent price hike “ensure a long life for our DVDs by mail”? Does it mean they’ll buy more discs? Use thicker shipping envelopes?”
An intelligent person such as Pogue should never fake a lack of common sense just to align with and satisfy his readers. It’s easily understood (and written point blank, black and white text) here that Netflix is ensuring the long life of it’s DVDs by mail offering as a service. Not the DVD media itself.
Pogue: “Apparently, the DVD+unlimited plan was profitable at $10. Netflix had every intention of “a long life” for that plan at $10. So I ask again: What changed in eight months that requires a 60 percent price hike?”
I don’t think the DVD+unlimited plan at $10 a mont is as profitable as people think. Imagine the cost of shipping and handling DVD media for millions of subscribers. Then tac on the cost to legally obtain, host, maintain, and stream 20,000+ movies and TV shows to millions of devices. Do you still think Netflix makes a huge profit at $10 a month?
This is exactly what Swasey is says:
“That’s not sustainable for the longer life of DVD’s,” Mr. Swasey said. “We need more revenue. It’s a business concern we have to address. We want two separate business units, each side of the service. We were not able to fulfill the requests for DVDs at that cost.”
It’s a fair business model. Netflix streaming took off better than they imagined. The cost of business to maintain and grow both sides of Netflix can not survive on $10 a month.
Pogue: “The size and timing of that price leap still don’t make sense to me. Especially when Netflix used to be considered such a good-hearted, consumer-focused company. The way it handled this shift feels extraordinarily blunt, ham-handed and emotionally tone-deaf.”
Ham-handed and emotionally tone-deaf? I can’t disagree more. I find it acceptable that a company wants to continue to innovate and grow it’s business. Netflix is a customer focused business, offering content that subscribers want, how they want it, at a price that is extremely reasonable. If you are a subscriber you see the good-hearted, consumer-focused emails that Netflix sends out regularly. Getting feedback on quality, offering title suggestions, updating us and even offering discounts when there is an outage in streaming service. Something you will never see from a cable/satellite provider, ever.
Plus, the new model is even less expensive for many Netflix subscribers. (I know many people that only want and use streaming, or only want and use DVDs. These customers win. They get a lower subscription fee and improved content in the future with the new model.)
Mr. Swasey: “But that increase is only $6 a month more. That’s a latté a month. We’ve gone from an extreme terrific value to a terrific value.”
Pogue: “Want to know the worst part? He’s right. PCWorld.com has a nice summary of Netflix alternatives. There’s Amazon Prime (no DVDs by mail, small streaming selection). Blockbuster by Mail (pricier mailed DVDs, no free streaming at all). Hulu Plus (no DVDs at all). Redbox (no streaming, pay by the day). In other words, even at $16, Netflix still gives you more than anyone else.
Mr. Swasey nails it, and Pogue almost reaches reason and common sense. What other company does what Netflix does? Who is competing on price or content?
Put this into perspective. Millions of us order up a Starbucks drink everyday, some people multiple times a day. At say $4 a drink, 5 days a week, that’s $80 a month for coffee. Millions of us go out to dinner and spend $30 on what might cost $8 for dinner at home. And millions of us go to a bar or pub and spend $25 for a couple of drinks.
Think about how much you pay for cable or satellite TV. Around $60 a month? More? $100? I bet you only watch half a dozen shows on a regular basis but dont think twice to pay the bill each month. This is what makes Netflix still such a great value. I traded in my cable providers $80 a month cable TV bill for Netflix and Hulu Plus. Now I get all the same shows I watched before, on the go, and movies both streaming and DVDs in the mail, all for $56 a month less. How is that not an incredible value?
Ultimately, when you consider the things we pay for every day that have little to no value but incurr huge monthly costs, it’s ridiculous that we get upset over a $6 a month increase for Netflix. Have only two drinks instead of three. Trade the lattes for green tea this week. Buy some fresh ingredients at the grocery store and make that meal at home. Ditch your cable/satallite provider for Netflix and Hulu Plus. You will be shocked at the savings and how little $6 a month truly is.
