by Larry Magid
There was no typo in the title of a Wall Street Journal blog post that declared, Netflix Customers Subscribe to Unlimited Screaming.” While I didn’t hear any actual screams, I did see a lot of complaints about Netflix’s decision to stop offering its DVD-by-mail service as a $2 add-on to its unlimited streaming service. As many blogs pointed out, a lot of Netflix users were pretty upset about what amounted to a 60 percent price increase for people who wanted both streaming and DVDs by mail.
The virtual water coolers on Twitter, Facebook and Google+ were certainly awash with negative comments. One of thousands of comments on Netflix’s Facebook page read “Cancel your subscription, bring down the Netflix stock. Then they will listen to us!”
Wall Street’s immediate reaction was quite the opposite. Instead of an instant slide, the stock went up after the announcement and continued to climb the next day. Janney Capital analyst Tony Wible wrote that Netflix’s “old pricing model was unsustainable,” pointing out that the company was “losing money on a cash basis.” On its own blog, Netflix put a more positive spin on the news: “treating DVDs as a $2 add-on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs.”
One reason for the price hike is that Netflix has to buy its content from Hollywood studios that are demanding a higher price for streaming rights. In June, Netflix stopped streaming Sony movies through its relationship with Starz because of a “temporary contract issue between Sony and Starz.” Also, the cost of buying and mailing DVDs is substantial. If you think about it, the postage alone could be a money-losing position. The extra $2 streaming customers paid for DVDs by mail wouldn’t even cover the round-trip postage if someone ordered four movies a month.
While I understand why some people are upset, I think it’s important to look at this from a long-term perspective. In its blog post about the price change, Netflix admitted that “we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as nonmembers,” adding that they expect “a long life” for DVDs by mail.
DVDs to go the way of VHS
Well, long is a relative term. Surely, people will continue to order DVDs for the next few years, but there will come a point when the vast majority of people are ordering up their movies and on-demand TV shows online instead of inserting plastic discs in a DVD player. And the day will come — perhaps not for another decade — when the DVD and Blu-ray go the way of the VHS player.
I don’t own a stand-alone DVD player but I do have a Sony PS3 connected to my TV that I can use for standard DVDs and high-resolution Blu-ray discs. And while I occasionally watch movies on DVD or Blu-ray, I find myself doing so infrequently. Call me lazy, but I don’t like having to walk way across the room to insert a disc, not to mention having to remove it and put it back in an envelope to return to Netflix. At least we no longer have to “rewind.” The PS3 is one of several devices that let you stream Netflix to a TV.
I do watch a lot of movies and TV shows via Netflix’s streaming service. Most are older titles, which suits me fine since I have a soft spot for older movies and TV shows. One of the things I love about Netflix is the ability to discover titles that I might not otherwise watch. Sure, some turn out to be dogs, but others are gems. There the worthy old classics like “Gone with the Wind” and “To Sir, with Love,” and plenty of silly “guilty pleasure” titles like “Gentlemen Prefer Blondes” or “No Time for Sergeants” that I could never justify spending money to rent yet enjoy watching. There are also some classic and not-so-classic TV shows like “The George Burns and Gracie Allen Show,” “The Dick Van Dyke Show” or more recent oldies like “The Rockford Files” and “Monk.”
However, until they greatly enhance their library with newer films, one can’t live on Netflix alone, and there are plenty of other options besides getting discs in the mail. One of the cheapest options is Redbox or Blockbuster kiosks in grocery stores, which typically charge $1 to rent a DVD.
Amazon and iTunes are two of several online rental services that have reasonably new titles. Hulu offers some TV shows for free (wtih ads of course) while Hulu Plus offers additional shows, current seasons and a relatively small selection of movies for $7.99 a month, the same price as Netflix streaming. HBO now offers its HBO GO streaming service for people who subscribe to the service via cable or satellite. Another option is Amazon prime. Sure, it has a much smaller selection that Netflix but it does allow you to stream some movies and TV shows and it’s cheaper. The price is $6.50 a month and also includes free two day shipping on most items ordered directly from Amazon.com. I got it for that alone and now obsessionally use it for video.
My favorite video steaming service for new films is Zediva.com, which — for a $1 per movie if you buy 10 coupons at a time — streams movies starting the day they come out on DVD. The company gets around the movie industry’s timing controls (called “release windows”) by buying physical DVDs and robotically controlled real DVD players that actually play the DVD when you order up your movie. It works, but because they need to have physical inventory, it doesn’t scale very well, which is one of the reasons there is a waiting list for new members.
So, scream if you will about Netflix’s 60 percent price rise, but even if Netflix hears you now, eventually these screams will fall on deaf ears as people realize that DVDs are oh-so early 21st century.