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Everyone is focused on the clumsiness of the marketing and customer experience, but there is a business strategy here. Shipping out DVDs is a heavyweight business: you have to have a large inventory of discs, you have to store them in distributed sites across the country, you have to have a lot of employees stuffing envelopes and then opening returned envelopes, you have to pay a lot in postage, etc, etc, etc. Streaming is, in comparison, a very lightweight business: you do need a lot of network infrastructure, but once you have that in place, you're just shipping bits over the wire. It's very similar to the software business: it costs a lot to develop your product, but once you do that, there are next to no incremental costs to make and sell one copy or one million copies; it is more or less pure profit. Coca Cola did the same thing many years ago. It separated out its heavy bottling and distribution side of the business into Coca Cola Enterprises, leaving the core business free to focus on the comparatively light business of making and selling Coca Cola syrup. So Netflix is looking to get rid of its heavy DVD costs and move to a nearly cost free streaming business. This is just the first step towards that. There's a reason why there will be little integration between your Netflix account/queue and your Quikster account/queue: to make the entire business easy to completely jettison. Soon enough, Netflix will sell Quikster and be out of the DVD business completely.
@Rob Fagen, actually, although I can't remember exactly (if I were home I'd look it up in Quicken), I seem to remember the monthly cost in 1999 for 4 out as around $14, so the inflation-adjusted cost comes to $18.97 today, per your site. Do I think that streaming + service improvements are worth $11.01 more per month? Delivery times for me are about the same as they were in 1999. I don't use recommendations. Although it has increased tremendously, my perception of the catalog is the same as it was in 1999: I can get just about anything that I want. Maybe today the difference is that Netflix has more of what I don't want, but that isn't a benefit to me. Clearly though, the service has improved over time and I benefit from it, but how much that's worth is up for debate. I gues we can have philosophical debates about that whether the inflation-adjusted value of the service is actually a good deal after all, and what am I complaining about? But meanwhile, I'm living in the real world where my wages (I'm lucky to have a job, unlike many) haven't increased in 5 years, property, sales and income taxes have risen steeply, and the cost of everything from gas to groceries are following suit. Netflix is now increasing my cost for the same service by 50%. It's a lot more money coming out of my pocket, black and white, dollars and cents. I can't tell Quicken that I'm really getting a good inflation-adjusted deal. We'll just have to reduce our usage to try to bring the price close to what we now pay. That's a clear-cut loss of value to me, as I'll then be getting less than I used to get for about the same cost.
@JasonAnderson9, called up Netflix. Only a small subset of devices, including Apple TV & PS3, support 5.1 for streaming. He was not even sure that the new Roku supports it, but I'm going to check it out. If I can just pick up a Roku and get 5.1, I'm down for that.
@JasonAnderson9, we stream on an Xbox 360. We also have a HD Tivo Series 3 that has Netflix. Both connect to the receiver via HDMI. For both, my receiver does not show that a 5.1 audio signal is coming through. We've watched HD streams and regular streams, its all the same crappy sound. Am I missing something (I hope)?
I've been using Netflix nearly since it started, all the way back to 1999. I've had the 4 out DVD plan all along, and in previous price increases, they've grandfathered me in or gave me a break on the increase, presumably since I'm a long term customer. So I currently have 4 DVDs and streaming for $19.99. Now that's going to go to $29.98. This is sort of a turning point for me, the first time they've screwed me over, and I feel really betrayed. At a minimum, we're going to reduce the DVDs out to try to keep the cost closer to what we currently pay. But I do not find streaming-only to be very compelling. What nobody ever talks about with streaming is the sound; I've got this thing called a home theater and sound is more than half the experience. The sound on streamed movies takes me back to the early 90s when I hooked my VCR up to my 2 speaker stereo system. That was cool then; today, not so much. It might be passable for episodes of a TV show, but BladeRunner or Lord of the Rings? Gag me.
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Jul 26, 2011