Another View Of The Netflix Price Hike: It's Speeding Up The Shift To Online Streaming

from the killing-the-cash-cows dept

When Netflix dramatically increased its prices for some subscribers, we immediately suggested that the ridiculously high licensing deals that Hollywood has been demanding were to blame, and wondered if Hollywood was killing the golden goose, by strangling it with high fees. I still think there's something to that, but Ken Doctor has an alternative take that's quite compelling. His argument, supported by Netflix CEO Reed Hastings, is that the price hike -- mainly focused on those using the physical DVD rental business, is designed to speed up the shift to online streaming.

When Netflix shocked everyone by pricing way up DVD-by-mail subscriptions — up to a 60-percent increase — that’s what he was doing: forcing the digital shift. The digital shift is what Hastings wants to happen faster. Right now, 60 percent of his 25 million subscribers are DVD takers, and the majority of the revenue is on that side of the business. He knew when he started the business that he would start with DVDs, but that the long-term business was streaming (“Six Lessons for the News Industry from Reed Hastings“). He just had to wait for the rest of the world to catch up to that vision.

The economics of his business is clear. Charge consumers less (for now) for streaming ($7.99 a month) — and profit more. As he shifts the business, the cost of revenues has already decreased almost two percentage points in a year, from 64.6 percent to 62.8 percent. Lower cost of revenues means higher cross margin, and that’s what investors have loved about the company.

In other words, the price hike isn't necessarily about the higher fees from Hollywood (though that's still there), but about speeding up the company and its customers' shift from relying on DVDs to digital. In some ways, that's really quite a forward-looking view. Most businesses that deal in having to shift their businesses from analog to digital tend to go in the other direction: seeking to delay the shift as long as possible, continuing to squeeze out the cash cow part of the business for as long as possible. You hear that all the time with people in the music, movie, TV and news business, whenever they say things like "we'll shift when there's a proven revenue stream." That's cop-out talk for "we're going to hang onto our old business until it's too late and others have taken our market."

Netflix, on the other hand, may be going in the other direction, actually seeking to be ahead of the curve for many of its customers, and then using the pricing wedge to nudge them forward to going digital only. I'm not sure I fully buy it, but it certainly puts a different spin on things.


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    Joe, Aug 1st, 2011 @ 10:12am

    Streaming only? No thanks.

    Here's why the plastic disc isn't dead yet.

    Streaming is all well and good until you go to watch a title, maybe one you've watched already and want to watch again, or a new one, and you get the message:

    THIS TITLE IS NO LONGER AVAILABLE

    Kind of hard to do with a DVD you insert into a player or computer, eh (assuming the media is OK).

    Until the "content providers" quit playing their little games; until 'this title no longer available' or 'this title is out of print' becomes a thing of the past ... a lot of us are sticking with good old plastic discs.

     

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      ComputerAddict (profile), Aug 1st, 2011 @ 10:19am

      Re: Streaming only? No thanks.

      +1

       

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      aperson (profile), Aug 1st, 2011 @ 10:46am

      Re: Streaming only? No thanks.

      and the moment it's not available you fire up your chinese vpn and go download it from somewhere. hypothetically speaking of course.

       

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      PaulT (profile), Aug 1st, 2011 @ 11:09am

      Re: Streaming only? No thanks.

      "(assuming the media is OK)."

      Erm, exactly. While I'm certainly with you on enjoying physical media for a lot of things, I do remember a lot of issues on Netflix equivalents while in the UK - nothing's more annoying than receiving a movie in the mail only for it to be unplayable and have to wait days for a replacement copy. It's also quite possible for titles to go out of print - if the copy you had is the only one they have, you're out of luck (surprisingly common for less popular titles as I understand).

      Either way, it's often better to have digital for cult/older titles (nobody has to go to the expense of manufacturing thousands of copies), but there's both advantages and disadvantages to both formats.

       

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      Anonymous Coward, Aug 1st, 2011 @ 11:24am

      Re: Streaming only? No thanks.

      There is a reason behind this. Most likely you are referring to something that was available on Netflix's Instant Stream as a StarzPlay! movie. This is a licensing deal that Netflix has with Starz to be able to show any/some? movies that Starz is showing on its channels. When Starz changes its lineup, existing "shared" movies expire on Netflix and new ones become available. This is somewhat of an exception to Netflix's normal license agreements, but it gets them some of newer content through a loophole w/ Starz.

      How are you trying to play it if it is no longer available?

       

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        John Fenderson (profile), Aug 1st, 2011 @ 12:29pm

        Re: Re: Streaming only? No thanks.

        This happens with all kinds of titles unrelated to Starz, and is one of the two reasons I cannot (at this time) depend on streaming. The other reason is that I'm not always in a location where streaming is technically possible.

        You can tell because the title still shows up in the play lists and catalogs, but is marked as unavailable for streaming. Or, if it's in a recently played list (such as if you've stopped in the middle and are coming back to it), then you get the message when you try to watch it.

        Netflix streaming is pretty good, but very far from ideal. In terms of reliability and size of the catalog, it doesn't even come close to replacing the DVD service.

         

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        Anonymous Coward, Aug 1st, 2011 @ 12:29pm

        Re: Re: Streaming only? No thanks.

        You have the option to add movies and what not to your Instant Queue, Netflix doesn't remove movies from the list once they've been removed from the option of being streamed.

        Also, its not solely the StarzPlay movies. Its other movies as well.

        If Netflix really wants to have its customer move to streaming they need to do two things.
        1. Expand their streaming library, its a fraction of their DVD selection.
        2. Never takes something off the streaming list.

        I'm a Netflix customer, and most likely will be switching to streaming only as that is all I use it for right now, even though having the option for discs was nice.

         

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          PaulT (profile), Aug 2nd, 2011 @ 12:04am

          Re: Re: Re: Streaming only? No thanks.

          As with so many people here, you seem to missing a couple of major points, and forgetting the wider picture.

          First of all, I'm very sure that Netflix themselves would love to offer a list that nothing ever gets removed from and consists of everything possible. They're not allowed to do so. Blame the studios and licensing for that.

          Past that, everyone whining about "they have more on DVD" or "I can get more TV on Hulu" is missing Netflix's ongoing strategy. They're clearly moving for global expansion, which is prohibitively expensive and a logistical nightmare for physical product. With digital streaming, all they need to have is enough local infrastructure to guarantee decent quality, and a reasonable enough amount of content.

          For those of us who currently have no equivalent to their service, nor access to Redbox, Hulu and the like, even the streaming service would be a godsend. Going forward, they're streamlining their services, which might mean that you get a less valuable service than you want or are used to, but globally I have no doubt that it's the right way forward for Netflix as a company.

           

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        Rob, Aug 2nd, 2011 @ 6:06pm

        Re: Re: Streaming only? No thanks.

        That's interesting to know about the StarzPlay thing. Although, I have Carl Sagan's Cosmos on my instant queue, and even watched some, but then it became unavailable again. so it's not entirely a StarzPlay thing.

         

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      Steve, Aug 1st, 2011 @ 11:38am

      Re: Streaming only? No thanks.

      You are right, BUT, just as Netflix is using this business decision to influence the CUSTOMERS to go to digital streaming, as the customers go, so will the movie distribution companies (or they'll die). In otherwords, Netflix over the years has built up a critical mass of customers that it is now leveraging toward digital distribution, and even though the movie companies dont WANT to be cutting edge on this, they will move because their customer base moved. Once they start the move, they'll begin to understand that it's cheaper to support the streaming than it is to press physical disks, and then maybe they'll be dragged kicking and screaming into the 21st century, instead of being left behind, unable to compete with more nimble digitally savvy distribution companies.

      I am personally glad that a company has the guts to try this. It is different from the government using taxes or incentives to accomplish some social engineering. Netflix is a private company and will live or die by it's decision. I personally will be with them.

       

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      Rob, Aug 2nd, 2011 @ 6:07pm

      Re: Streaming only? No thanks.

      I see streaming as a cheaper, more convenient form of TV. I watch what I want, when I want, with no commercials, within their limited selection. If I want to own something indefinently, I'll buy it. Although, that's no guarantee either (DRM, region coding, etc). If you really want to OWN something, pirate it.

       

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      SwordFishData, Aug 7th, 2011 @ 5:28am

      Re: Streaming only? No thanks.

      That's why the Plastic Disc will never die, true enough.

      But you have to HAVE THE PLASTIC DISC. When I rent a DVD from Netflix, I have wait for it to be available in my queue, wait for it to come in the mail, watch it, send it back, etc. If I want to watch it again, I have to repeat this again; for low-availability DVDs, this can be an arduous process.

      Who cares if I want to watch something again? If I want to watch it that badly, I'll find a cheap DVD somewhere. As long as Netflix has a LOT of what I want to watch (not necessarily most, even), right the damn now, I'm not going to begrudge them circulating some titles out, on occasion.

       

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    Anonymous Coward, Aug 1st, 2011 @ 10:14am

    Yes, but ..

    I'd be happy to drop my physical subscription to Netflix, if they actually ever had what I wanted to view on streaming (rather than just via physical disc). Seemingly all of the new movies and TV shows are now only on disc. I don't see how they are going to get the shift to happen if they can't convince Hollywood to give people the good stuff on streaming.

    I don't Torrent - I just stop watching shows because I can't watch them when I want to. I guess that's an alternative model.

     

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      tikkiggodd (profile), Aug 1st, 2011 @ 12:17pm

      Re: Yes, but ..

      I agree. New movies are not released via Netflix streaming service, and any TV Shows they do have are normally missing anywhere from the last 2 to 5 seasons (maybe Netflix hasn't heard of Hulu, since Hulu's free service has more TV content then Netflix). I would have no problem with paying for streaming service if the service contained the same things I can acquire through the mail service.

      As it is, I'm probably canceling my Netflix account instead of paying monthly for a limited selection of movies and shows. Congratulations Netflix, you went from receiving my money monthly to not at all...good things you raised your rates to compensate for the lost income.

       

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    Anonymous Coward, Aug 1st, 2011 @ 10:15am

    Isn't it sort of obvious? Netflix is converting a business that costs them $0.xx to ship and manage a DVD around to a streaming model that likely costs them $0.0x to manage. For them, it's a bottom line win, even with increasing acquisition costs for the content itself.

    Go further, they can replace warehouses and processing centers with a building full of servers and fat fibre. Long term costs for physical plant shrinks as well.

    Netflix is being the canary in the coal mine here for the idea of online streaming as a business. It's taken them a long, long time to get here (how many years have they been pushing their stuff into set top boxes and TVs?), and now they will show that there is either a real demand, or that it's just another channel that won't overtake everything else.

    Notice they are smart enough to keep a foot on each side as well. They aren't ditching one business for the other, they are working them in parallel and seeing if it really pans out.

     

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    Tallbonez (profile), Aug 1st, 2011 @ 10:16am

    Plastic Disc? No Thanks

    I don't finish about 70% of the movies I start because they stink. Streaming allows you to sample a wider variety of content with lower risk (in this case the risk of losing your time, which in the case of a subscription mailed DVD, adds up quickly).

     

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    Jay (profile), Aug 1st, 2011 @ 10:19am

    Wow... I never thought this would occur in this fashion but it does make sense. The less you spend on the DVDs, postage, etc, the more money to you. Any copycat businesses can try to make a business on the DVD portion if they must, but it's going to be a lot more expensive as Gamefly is learning.

    It's almost poetic in a way. Netflix is moving forward, leaving Hollywood behind. Ari Emmanuel says that the movie business's model is centered around the DVDs. There's going to be a rude awakening as Netflix gives it to them with a sign saying "Here you go".

     

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      HothMonster, Aug 1st, 2011 @ 1:41pm

      Re:

      except hollywood is dragging them down with them with their ridiculous prices for streaming content and "barriers," the only thing keep me from switching to streaming only is the lack of selection. Sure I can find something good to watch on streaming but any newer movies that I want to see and a lot of old favorites I want to show others are still only on DVD

       

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    Jason, Aug 1st, 2011 @ 10:21am

    Streaming sucks though

    I live less than a mile from Seattle downtown. A fairly major tech center.

    Best I can get is a 5M DSL connection. This is barely enough to handle "standard def/stereo" streaming.

    No, streaming is still in the infancy and boy does it suck right now.

     

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      taoareyou (profile), Aug 1st, 2011 @ 11:38am

      Re: Streaming sucks though

      I live in a rural town in the mountains of western NC and have 12mb fiber (could even have faster but don't need it so why pay for it). We can have Spotify streaming in one room, someone watching YouTube vids and people downstairs watching Netflix streaming. Everything works smooth.

      I don't think streaming is in its "infancy" just because some areas don't have options for quality streaming. If it reaches me and my neighbors are trees, it can't be too rare to have a decent connection in the U.S.

       

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        John Fenderson (profile), Aug 1st, 2011 @ 12:32pm

        Re: Re: Streaming sucks though

        The studies show that's is very rare, and you are very lucky.

        Such speeds are not available anywhere in my state, let alone my town, as near as I can tell.

         

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      Khory (profile), Aug 1st, 2011 @ 2:49pm

      Re: Streaming sucks though

      Why DSL? Is cable not an option? You had Qwest and Comcast down there when I lived near Seattle a few years back. Frontier Fios in some areas too.


      Streaming isn't in its infancy, but you certainly need proper broadband to use it fully.

       

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    Almost Anonymous (profile), Aug 1st, 2011 @ 10:28am

    Bandwidth caps anyone?

    """His argument, supported by Netflix CEO Reed Hastings, is that the price hike -- mainly focused on those using the physical DVD rental business, is designed to speed up the shift to online streaming."""

    I can certainly believe that Hastings is thinking along these lines, but he's not looking at the big picture. ISPs all over are tightening up their bandwidth caps and throttling/shaping all kinds of traffic. I'll bet that watching several streamed movies/episodes a week will get you to those un-advertised caps pretty quickly... and then the ISPs will either throttle you way down, or charge you per gigabyte (or some scale) for the rest of the month! People are not going to be thrilled to get a $300 bill from their ISP because they didn't realize those streaming movies over Netflix had pushed them into a $/per gigabyte tier.

     

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      duane (profile), Aug 1st, 2011 @ 10:42am

      Re: Bandwidth caps anyone?

      this for sure, and what about the fact that Netflix is essentially handing Hollywood its balls?

      The more Netflix goes away from discs, the more Hollywood gets to dictate the licensing terms for Netflix content.

      We've already seen that they really don't have any interest in the success of Netflix and actually see themselves as benefiting from its demise. This is not a partner you want.

       

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      Anonymous Coward, Aug 1st, 2011 @ 10:58am

      Re: Bandwidth caps anyone?

      That might not be a bad thing in the long run.

      Enough of those 300$ bills and people will demand that the ISPs start investing in infrastructure and stop with the retarded caps (I understand that unlimited internet is currently not possible, but that should dealt with by throttling over x limit, not caps that are meant to be exceeded to pad profits.)

       

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      PaulT (profile), Aug 1st, 2011 @ 11:19am

      Re: Bandwidth caps anyone?

      It might go both ways. At the moment, only a small number of people are reaching those caps, and the assumption is that those who are access mostly illegal content. If those caps are reached more quickly, on legal content, by many more people, they will either need to invest in infrastructure or change their pricing models (in areas where competition exists, at least).

       

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      taoareyou (profile), Aug 1st, 2011 @ 11:45am

      Re: Bandwidth caps anyone?

      If data caps actually start affecting people regularly, they will first respond by reducing their usage without having to reduce their consumption. This will be accomplished by more and more aggressive ad blocking. When ad blocking becomes part and parcel, a lot of business', websites, blogs, etc etc will find their revenue dropping.

      Pressure to remove data caps will escalate. ISPs that fail to adjust will see their customer base shrink as those providing fiber solutions expand.

       

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        Anonymous Coward, Aug 1st, 2011 @ 11:58am

        Re: Re: Bandwidth caps anyone?

        While ad-blocking makes the ads not seen, they are still being sent. This means that they still count against the damn caps. Even if they are blocked at the router, they are still sent and received and then blocked from entering the LAN. THEY STILL COUNT TOWARDS THE CAPS!

         

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          imbrucy (profile), Aug 1st, 2011 @ 1:31pm

          Re: Re: Re: Bandwidth caps anyone?

          I don't know if using plugins like Adblock blocks the ad download or not but if you do the blocking by using a custom hosts file then they will not be download and will not affect your data caps.

           

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          techflaws.org (profile), Aug 1st, 2011 @ 10:06pm

          Re: Re: Re: Bandwidth caps anyone?

          Actually that's not the case. Adblock+ does not load the ads, which is why some servers already send you a message like "if you value our service, please disable Adblock, so we can continue to provide it".

           

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      Anonymous Coward, Aug 1st, 2011 @ 11:54am

      Re: Bandwidth caps anyone?

      Or, he's forcing the issue. Companies like Netflix will only survive if a relatively unrestricted net is available. He probably has an equal chance of customers being mad at Netflix as he has of customers being mad at their ISP, but only at this particular moment. That is, if the service starts out good but becomes crappy, maybe Netflix can help their customers funnel their anger where it truly belongs. On the ther hand, if teh service starts out crappy (as in, after *all* the ISPs have started throttling) then Netflix stands a lerrer chance of surviving.

       

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    Eric Barrett, Aug 1st, 2011 @ 10:35am

    It's still terrible communication

    I'm sure there's an element of truth to this. But whether it's true or not isn't really the point. What gets me is how terribly communicated all of this was. Spending 15 minutes writing a more effective e-mail explaining this would have served wonders for their PR.

    If this was really Netflix's intent, they should have just said this. Then at least customers would know why their rates went up. And I would be saying, "Hey that's great. It's not for me. But I hope it works out." Instead the message they sent was vague and sudden. And what most consumers heard was "Surprise! Rate hike!"

    It may or may not be an effective business strategy. But it's a terrible customer service strategy.

     

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    PlagueSD (profile), Aug 1st, 2011 @ 10:44am

    Re: Yes, but ..

    I'd be all for 100% streaming of content, but Netflix doesn't allow this. I start watching a show that I like, but it's already in it's third or forth season. I go to netflix to catch up on the series.

    About halfway through the first season there's a DVD-only episode. now I have to order the DVD and wait for it in the mail. I think that's their way of "slowing down" how many shows you can stream.

    Also, High-speed internet is not available everywhere. If you can't stream a movie, you have no choice but to get the DVD.

     

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      into_the_red, Aug 1st, 2011 @ 10:54am

      Re: Re: Yes, but ..

      The strategy would make sense, but I'm not sure how many people are comfortable with having their entire media experience dependent on the whims of a third party - who knows how long a given title will be streamable for? And whether a greater percentage of the catalog will be streamable in the first place. More of it is now (for example, the Star Trek series and movies used to be DVD-only, but now they're streamable as well).

      Netflix and streaming are good things, they just need time to develop and looser reins from Hollywood. It's why I still find the DVD service useful—aside from backing up my own DVD's to my external drive, I also do so for DVD's I rent from Netflix. That way I'm able to watch them anytime, online or off, from my 360. I prefer to be in control of my media, is all, rather than a third party.

       

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    theangryintern (profile), Aug 1st, 2011 @ 10:48am

    Reed's plan is only going to work if Netflix gets in gear and converts it's ENTIRE DVD collection on to the streaming network. The main reason most people are doing both DVD and streaming is that not everything is on streaming yet. There is a pretty good selection, yes, but a lot of stuff that people want to watch are not yet on streaming.

     

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      jackn, Aug 1st, 2011 @ 12:40pm

      Re:

      unfortunatly, its not that easier

       

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      techturf (profile), Aug 1st, 2011 @ 1:01pm

      Re:

      >> is only going to work if Netflix gets in gear and converts it's ENTIRE DVD collection on to the streaming network

      Stupid Netflix. You would think they would have figured out how to rip a DVD by now.

       

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        Rich, Aug 1st, 2011 @ 2:29pm

        Re: Re:

        The issue is legal, not technical. Netflix can't just rip a DVD and stream it to you without securing a license to do so.

         

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      PaulT (profile), Aug 1st, 2011 @ 11:43pm

      Re:

      Yep, as already pointed out, I bet that Netflix are not only willing to do that, they have a library of rips waiting. They're just not allowed by licensing to stream them yet.

      "There is a pretty good selection, yes, but a lot of stuff that people want to watch are not yet on streaming."

      Because the studios are still living in hope that if they stop you from streaming it as long as possible, you'll end up buying a full priced DVD.

       

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    Anonymous Coward, Aug 1st, 2011 @ 10:51am

    This was obvious I had thought.

    I do see an issue looming its ugly head soon though. Here in the US we pay a premium for crappy services. We're used to it from a consumer standpoint, particularly when it comes to bandwidth / internet / cable / phone services. The excuse that the providers give are many and varied and... completely bogus. Because we as consumers pay whatever they charge, there's no real competition, and they control the actual legislation that matters through various means we're sinking lower and lower in quality vs. cost comparisons as their bottom lines get fatter.

    Not only that, virtually every pipe provider bold faced LIES about what they're actually providing you. If you're with a major company like Comcast / X-finity / Verizon / FIOS / Frontier / or any other mainstream subsidy and you actually monitor the bandwidth you're getting you'll see that not only is it capped... but it's NOT what they say they're providing, lol.

     

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      The Mighty Buzzard (profile), Aug 1st, 2011 @ 11:09am

      Re:

      Meh, I pay AT&T for 6Mb/768Kb and that's exactly what I get, minus overhead of the various protocols of course. Now we'll have ourselves a bit of a disagreement the first time they charge me an overage fee or send me something accusing me of piracy but that's got nothing to do with the fact that I get their advertised speeds.

       

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        Anonymous Coward, Aug 1st, 2011 @ 11:59am

        Re: Re:

        I pay for 20 meg down on Suddenlink. On the weekends they uncap it, or they have something retarded in place that they don't understand and that I'm not going to tell them about. Usually my speed tests during the week get me between 15 and 22 down, but on Saturday and Sunday I get 35-43 down.

        I am not sad about this.

         

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    Gina, Aug 1st, 2011 @ 10:55am

    There is something really wrong with Netflix streaming in the past couple of weeks. Many of their newest titles aren't playing, some have no audio track and some have no picture. Today, there are reports on a social site that this is happening with all titles. There is no response when problems are reported (in fact, when one title did finally play for me, I got a "how was the quality?" email; yet no word on the titles that I reported would not play).

    This is what our price increase is paying for? I was a happy customer even with the plan change. I've been a customer for almost a decade. This is not good.

     

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    PrometheeFeu (profile), Aug 1st, 2011 @ 10:55am

    I'll get a netflix subscription when they start streaming on linux. I'm not willing to reboot in order to watch a movie.

     

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    John Doe, Aug 1st, 2011 @ 10:58am

    Had the opposite effect on me

    I dropped the streaming option and stuck with the DVD plan as their streaming library BLOWS. If they want to speed up the adoption of streaming, they need to offer a compelling product. The problem then becomes they are bent over the desk by the movie studios.

     

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      Anonymous Coward, Aug 1st, 2011 @ 12:05pm

      Re: Had the opposite effect on me

      Same here. I dropped streaming and went to the cheapest plan they have $4.99 per month.

       

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    Anonymous Coward, Aug 1st, 2011 @ 11:00am

    Digital

    Hate to tell you this, Mike, but DVD's are digital.

     

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      The Mighty Buzzard (profile), Aug 1st, 2011 @ 11:11am

      Re: Digital

      No, DVDs are analog. The videos written to them are digital. If you're going to be pedantic, be correct.

       

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        Rich, Aug 1st, 2011 @ 2:35pm

        Re: Re: Digital

        NO. This comes up here all the time. For some reason, people have it in their heads that the difference between analog and digital is physical vs non-physical, and that simply is NOT the case. Being physical does not make a DVD disc analog. That is nonsensical. Something analog is encoded as a continuous waveform. Something digital is encoded as discrete values. Recorded information is analog or digital. The physical medium they are recorded on is NEITHER.

         

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        Anonymous Coward, Aug 1st, 2011 @ 2:36pm

        Re: Re: Digital

        DVDs are digital. The first "D" in DVD is "Digital". The output from a DVD player is generally an analog signal because there's a Digital to Analog converter in the player.

         

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          Rich, Aug 1st, 2011 @ 2:47pm

          Re: Re: Re: Digital

          He is trying to make the argument that the disc, itself, is analog even though the information on it is digital, because it is a physical thing. This, of course, has nothing to do with the definition of analog. Analog and digital seem to be colloquially used here to mean physical and non-physical, respectively. That is completely wrong. Both a laser disc and a DVD are physical discs. The recording on the former is analog, while the latter is digital. The discs themselves are irrelevant.

           

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            The Mighty Buzzard (profile), Aug 1st, 2011 @ 4:05pm

            Re: Re: Re: Re: Digital

            Actually, no. I was referring to the fact that while on the spindle it physically spins through all the infinite points rather than jumping between fixed positions. It does not exist in limited, pre-defined quanta but in an infinite number of different possible positions.

            If you really want to get pedantic about it we could bring it to the subatomic level and argue until we're both way out of the zone wherein we know what we're talking about. And given the nature of quantum mechanics, we could end up both being right and wrong at the same time.

             

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    DanHass, Aug 1st, 2011 @ 11:01am

    NetFlix digital shift

    I can see the relevance of having the company go all-digital. But given the awful selection they have digitally, I saw no compelling reason to do digital streaming and cancelled it for the DVD service.

     

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    Todd S. (profile), Aug 1st, 2011 @ 11:04am

    Streaming is not the golden goose, yet.

    As a Netflix streaming subscriber I am frequently frustrated by the lack of content available (Ghostbusters 2, but not Ghostbusters?) or content that disappears (Sagan's Cosmos used to be in my queue, now it's gone). Not to mention that my ISP, Verizon DSL, has difficulty maintaining even a 1.5 Mb connection to my house for more than 1/2 hour at a time. Any shift to streaming as the norm will require not just a broader content selection (which would in turn require less draconian IP regulation), but it will require physical infrastructure upgrades as well.

     

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    John, Aug 1st, 2011 @ 11:04am

    My immediate reaction was that Netflix was trying to decouple its revenue streams so that when they went in to negotiate with the content providers they would be able to avoid having to discuss gross revenue when the studios say "our content is worth at least x% of your revenue".

     

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    Anonymous Coward, Aug 1st, 2011 @ 11:08am

    yeah, but with all the ISP caps now on home service this option will be dead in the water. I do not pay for cable and used over 450GB of my new ATT 250GB cap. So, Ill continue to get the disks and copy them for later viewing.

     

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    Thanatos, Aug 1st, 2011 @ 11:11am

    And what happens when streaming dies off due to telecos implementing data caps on their broadband service? I have AT&T and they just capped us off at 150GB per month - unless you want to pay $10 for each 50GB over that. I use, on average, 350-400GB per month - most of which comes from streaming movies and shows online. I may as well cancel my Netflix and Hulu if I have to worry about going over their damned limits every month! And if I can't stream media, then why should I even bother paying for broadband at all? I can check email and visit a few non-streaming sites with lousy assed dial-up!

    And with smartphones, AFTER AT&T decided to go to tiered data plans to charge us out the ass more, NOW they are throttling the data flow!!!

    Thanks to corporations like AT&T, the U.S. is falling behind the rest of the world pitifully in Internet broadband access. Does anyone else find it pathetic that North Korea makes the entire US look like it's still using 1200baud modems?!?!

     

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      John Doe, Aug 1st, 2011 @ 11:17am

      Re:

      If Obama, or any president, wants to create jobs and bring the US back to the forefront, then they need to loosen the rains on technology. Scale back patents and do away with them completely when it comes to software, scale back copyright and stop the monopolies on broadband and wireless and create some real competition.

      Right now we have so many choke points on technology, that it is a wonder anything gets created.

       

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        hegemon13, Aug 2nd, 2011 @ 6:44am

        Re: Re:

        Unfortunately, both of our highly-authoritarian parties will scream "radical extremist" at anyone who suggests that they "loosen the reins" on anything.

        But, you're right.

         

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    A.R.M. (profile), Aug 1st, 2011 @ 11:16am

    A very stupid decision on the part of Netflix.

    When I first heard the announcement, I felt it didn't impact me at all. Unfortunately, it may in time because most comments I've read has subscribers ditching the streaming part of the plan, not the other way around.

    And who can blame them when the latest movie Netflix has in its streaming catalog is dated at 1802? Yes, I'm being facetious, but only to a point because it's well known the movie catalog Netflix offers isn't worth the streaming price by itself. Many had the DVD option with it.

    Now that Netflix has forced the hands of its consumers, I can almost see the writing on the wall my subscription service to streaming will come to an end because few will support it.

    I wouldn't have minded the change had the online catalog included everything the DVD catalog had, but sadly, at $16 million per movie, not only was the request unrealistic, but shows the issues Netflix has before it when trying to support its online services against an industry grasping on the DVD with a firm grip, afraid to let go.

    I told myself I'll get through the summer and if Netflix shows no signs of improvement with its streaming services, I will cancel my membership until it has restored my faith it's more than 80s movies and TV shows.

    Until then, I'll just do without because, well, to hell with an industry trying to rape my walled of $25 movies most aren't even worth pirating.

    I hope Netflix corrects this situation... and fast.

    With walled gardens going up by others, it's just a matter of time before we're all screwed into "special deals" at $99/mo. for "unlimited, but restricted bandwidth, streams".

    Throw in copyright issues, and well... another great idea ruined by capitalism's inability to stifle greed.

     

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    Greyson, Aug 1st, 2011 @ 11:22am

    Streaming's unintended consequenses

    Why is no one talking about how once the model "shifts" to digital only on all the fronts, now the ISPs are really in control. I can see it now... "Oh, you want to watch unlimited movies on netflix instead of on our premium service or pay-per-view? thats going to cost you because thats internet bandwidth, not tv bandwidth."

    No matter how you dice it the all you can eat internet for $39.95 is soon to be a thing of the past...

     

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      John Doe, Aug 1st, 2011 @ 11:36am

      Re: Streaming's unintended consequenses

      Exactly, it will put the broadband/wireless providers in control and they will start filching money out of our wallets.

       

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    Bill M., Aug 1st, 2011 @ 11:22am

    As others have pointed out, the lack of reliable selection makes Netflix streaming-only a poor choice. I have little doubt that the move was at least partially motivated by this intent, i.e. force more people to go all-streaming and forgo the mailed discs, however, unless your streaming offering is able to be comprehensive, you are just as likely to drive people AWAY from the streaming service and back to disc-only. I am strongly considering that exact move, and have several friends who have already made it.

     

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    rangda (profile), Aug 1st, 2011 @ 11:34am

    If that was the reason then it had the exact opposite effect on me. I went from 3 DVD/BluRay+streaming to 2 DVD/BluRay. My queue had ~30 movies on it and only 2 could be streamed.

     

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    John D (profile), Aug 1st, 2011 @ 11:41am

    I thought this was obvious...

    Netflix has made it clear that they consider themselves a 'streaming business that ships a few DVDs' - this only further solidifies that.

    I'd suspect that, when the time is right, Netflix will end DVD by mail distrbution and either a) Buy out RedBox or b) create a RedBox competitor. This consolidates their DVD shipping costs while getting people the new releases they want in HD formats (like BluRay). This will happen, it is inevitable.

     

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    Rich Fiscus (profile), Aug 1st, 2011 @ 11:41am

    If that really is the motivation behind this decision, it's poorly thought out. Lots of people use Netflix because they can get access to content like old TV shows or content from outside the US which isn't readily available through traditional rental outlets. I haven't decided if I will be sticking with a discs + streaming plan, but I can tell you for sure that if I have to choose one or the other it will be the discs. And I use the streaming service almost every day.

    I would be shocked if more than a tiny percentage of Netflix customers would consider streaming an adequate substitute for their disc selection. And by tiny I mean 5% would be generous. I think that number needs to be at least 20% - 25% before this sort of move makes sense from a customer retention perspective.

     

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    CommonSense (profile), Aug 1st, 2011 @ 11:46am

    This was my first thought as well.

    That they were separating them to find out which one customers wanted to stick with...almost asking people to pick one or the other. It cuts down on any ambiguity in the numbers, like "75% of our DVD customers also use the streaming" because it was included for free. Now they'll find out who is willing to pay for streaming, and who will pay for DVDs. I never used the DVD part of it. I was a blockbuster customer for DVDs in the mail a number of years ago when they were still around, but it was too inconvenient to wait for something in the mail. Once netflix streaming came available on a set top box (Roku!) I jumped on it, and started paying for that and Hulu+, and I cancelled my cable subscription. Pretty much anything that isn't on Netflix is on Amazon Video OnDemand, for normal OnDemand prices, and since I'm paying $16/month instead of $120, I can afford a few more of those than before, and the quality is very good. Anyway, with this split in the market, they'll be able to tell Hollywood "see, people aren't just using streaming because it's included, they actually WANT it."

     

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    Big Mook, Aug 1st, 2011 @ 1:05pm

    Netflix streaming isn't ready even if catalog was bigger

    Forget about the less-than-stellar video quality you sometimes get with streaming Netflix. I have yet to stream any movie that actually presents true 5.1 digital audio in the stream. The best I can hope for is stereo encoding, and then having my home theater receiver give it to me in ProLogic II (simulated 5.1). It is always a better experience to have the DVD, or better yet, the BluRay, just to get the best possible audio and video.

    The quality issues, in addition to the too-small catalog, is forcing me to go back to the DVD-only option. If Netflix decides to eliminate their DVD-by-mail operation, then so be it, then I'll look for other options. Streaming just doesn't cut it if you actually want a decent viewing and listening experience for your money.

     

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    Travis, Aug 1st, 2011 @ 1:17pm

    Netflix Streaming What?

    With all their contract troubles for new movies I had to cancel Netflix alltogether becasue there was nothing worthwhile to stream and it would take forever to try and navigate their stupid new GUi anyway. If I could get all the new movies streamed, and searchable, I would sign up in a heartbeat.

     

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    PlagueSD (profile), Aug 1st, 2011 @ 1:34pm

    I live in a rural town in the mountains of western NC and have 12mb fiber (could even have faster but don't need it so why pay for it). We can have Spotify streaming in one room, someone watching YouTube vids and people downstairs watching Netflix streaming. Everything works smooth.


    Consider yourself lucky if you get those speeds. In SoCal, if I want that type of speed, I need to sign up for a Business level plan (expensive as hell.) Right now, the fastest I can get is 5-8mb down and 1mb up with Time Warner. I REFUSE to sign up with AT&T for ANYTHING.

     

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    Anonymous Coward, Aug 1st, 2011 @ 1:40pm

    Uh, this change will likely result in my canceling the streaming part of my subscription and just keeping the (now slightly cheaper) plastic disc part. Maybe for some other folks it'll be the other way around for now, but once they run out of things they really want to see from the (really pretty limited) streaming selection, they'll likely be switching to the plastic discs too.

     

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    btr1701 (profile), Aug 1st, 2011 @ 3:38pm

    Didn't Work

    His strategy didn't work with me. Not only did I dump the streaming, but my monthly bill went down without it.

    Although they did kick me in pants with the iPad app. I went to use it the other night only to have an error box pop up that said, "This app is now only functional for customers who have chosen the streaming service."

     

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    mrtraver (profile), Aug 1st, 2011 @ 7:45pm

    I don't buy it (yet)

    The choices in the Netflix streaming catalog are not nearly as numerous or as current as their DVD offerings. If the catalogs were identical, I would believe it, and I would drop the DVD portion in a heartbeat (or as soon as I could convince my wife to, since the account is actually in her name). Although I then would not be able to watch movies/shows in my bedroom, since there is not a computer or any streaming device in there.

     

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    Gregg, Aug 2nd, 2011 @ 5:37am

    Economics 101: Carrots and sticks

    If Netflix sees an advantage in shifting customers to streaming, it should *lower the rates* for streaming, not raise the rates for DVDs! If the market is working (ie strong competition) that sort of business thinking will get you in trouble fast.

    Also, Mr. Hasting's "big picture" sounds very short-sighted: Netflix achieved market dominance because of the huge barrier to entry of building a DVD collection and distribution center. When it comes to streaming, the only barrier to entry is a license fee, and the studios are likely to give everyone the same price, so incumbents will have almost no advantage, size will not matter, and cost will be key. In other words, it will be a commodity market, and margins will be negligible.

    I agree that streaming is where the market is going, but it is not in Netflix's interest to push it there!

     

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    Decadre (profile), Aug 2nd, 2011 @ 9:42am

    "to nudge them forward to going digital only"

    I did the exact opposite, and canceled OR rather declined the unlimited streaming option. Now I only have DVDs by mail, which is perfectly fine to me.

    As it stands, there really is absolutely nothing of value for me or my family on Netflix's streaming service. About the only use we got out of it, was streaming some children cartoons. However, I also have Video on Demand from my cable provider so I can live without streaming Netflix.

    Until Netflix's streaming library equals their DVD library in size, then I am not paying for it.

    I am also not going to pay for them to slowly build the library to a size that I deem worthy, as I am obviously not getting my value during this "building process".

    I however will go back to their streaming service once the value equals the quality, but not anytime sooner!!!

     

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    Michael Knight, Aug 2nd, 2011 @ 12:55pm

    Netflix price hikes

    As a subscriber, I choose to recieve DVDs over streaming as in streaming there is a 'hidden cost' which is not being talked about. ISP are slowly but surely creating caps and otherwise seeking ways to bleed more money from subscribers for the same service. So by going to streaming I am confronted with potentially more cost increases as I use my internet more. Netflix doesn't mention that and most likely doesnt care. It is about profit, not giving the publis what they want.

     

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    Jef, Aug 3rd, 2011 @ 3:19pm

    HD Streams w/out Issues?

    So-called experts are stating that Netflix & its media-supplier partners want subscribers to use streaming and eventually discard supplying discs. What is NOT being stated is that subscribers must be masochists if they only use streaming. The quality of streaming is unlikely in even the next few years to rival a HD blu-ray disc – I used both the disc supply & streaming with Netflix. Streaming quality was usually only 480p resolution and that stream included numerous stutters – And I use high speed cable! Basically, the upcoming new Netflix pricing is lower than poor - it rivals the upcharge for 3-D theatre movies that use passive glasses - usually not worth it. Exactly where are the technical statements about how streaming will be HD quality with negligible issues? And what about possible bandwidth caps and other service issues from your ISP and home network? Tiered internet service is here unfortunately and the bottom line - I will be cancelling Netflix later this month

     

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    Terry, Aug 13th, 2011 @ 4:17pm

    +1 for streaming sucks

    We leach off my son's Netflix subscription via DVDs and streaming on an Apple TV. I rarely find anything worth streaming. I also have FiOS and iTunes on Apple TV. Though also limited, if I stream a movie, it's rarely Netflix. Plus it's not portable. I can't watch a Netflix movie on the airplane.

    If this is a move to encourage streaming, Netflix has made a huge miscalculation. If this were my subscription, I'd drop the streaming and stick with the DVDs. Perhaps I'm not their target market.

     

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    Tom, Aug 18th, 2011 @ 4:32pm

    Backfiring

    What made Netflix work was the combination package. It helped make up for the lack of streaming library and get around the broadband caps. Most people I know are either dropping both or dropping streaming. If streaming is the goal, then it looks like the move is backfiring. It is likely that I will be dropping both come 9/1/11. Hmmm...

     

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