Netflix announced a major reshuffling of its pricing strategy on Tuesday, potentially causing customers to pay double what they had been paying.
The online and mail-order DVD company announced that customers would no longer be able to get unlimited streaming in addition to one DVD out at a time for $9.99. Instead, customers will have to pay $16, a price increase of 60 percent, if they want both of those options.
Customers would have to pay $7.99 for unlimited streaming and an additional $7.99 to have one mail order DVD out at a time.
The decision seems to go against some of the companies' earlier philosophies and business strategies. In its rise to power over Blockbuster and other video stores, Netflix focused primarily on improving its immediate online streaming capabilities and not the mail-in DVDs operation.
In November, the company had the mail-in DVD feature as a throw-in for only $2 in addition to the unlimited streaming package. But now the California based company has drastically changed its views, in part because it now sees a viable market for both options.
At the time, we didn't anticipate offering DVD only plans, Netflix spokesman Jessie Becker said in a statement. Since then we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members.
One other reason why Netflix announced this decision could be to force the mail-in DVD customers over to the online streaming side of the company.
Given the long life we think DVDs by mail will have, treating DVDs as a $2 add on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs.
The company recently announced its intentions to expand into the Latin America and Caribbean markets.
As of 3:11 pm, Netflix (NFLX) was up $3.71 to $294.45 on the Nasdaq Stock Market.
Customers Quickly Air Frustrations to New Policy
Whether the separation of the plans will be successful is unknown, but Netflix customers quickly took to the official Netflix blog to air frustrations. One of the main frustrations is that many of the mail-in DVD options are not available to be streamed online.
Justin Block wrote in the comments section, The only way this will make anyone happy is if this translates to newer and more content in the streaming catalog. The changes you guys have made in the last 4-6 months have turned me from a serious Netflix Geek into considering cancellation. It's a damn shame. I love your product (honest) but these decisions will not keep me around.
Other users were upset that the new measures apply to all Netflix customers---and not just new subscribers.
A clearly very irritated Scott Fagaly wrote, ...What a great way to treat you (sic) long term customers, we REALLY appreciate it...I can understand you applying it to new customers... but please, explain to me who's brilliant idea this was.