Netflix announces price hike, infuriating customers over a matter of $6

by Phil Hornshaw

The Internet is aflame with the outrage of Netflix (NFLX) users after the company announced it would be separating the fees for its DVD and online streaming services.

Previously, subscribers to Netflix could pay for the DVD service, which allows users to request DVDs through the mail and received the unlimited streaming service along with it for $9.99. The announcement separates the services, starting both at $7.99 – a difference of about $6, all told. Streaming has become incredibly popular and is available on numerous devices, including a few Android smartphones, Apple’s iOS devices, video game consoles, computers and several other Internet enabled TVs and set-top boxes.

Netflix hasn’t released any internal numbers to explain the hike or much of an explanation at all, but some of the speculation circulating is that Netflix has found it has many more DVD customers than it has expected this long into the release of its streaming service. As seems apparent from the phasing out of DVD queue features from its mobile apps for Android and iOS devices, Netflix was expecting users to gradually move from DVDs to streaming full-time. The DVD business has substantial overhead, what with procuring and maintaining physical discs and the fees for mailing them, while it stands to reason that the streaming service would be less cost-prohibitive, even though it’s extremely popular and consumes a lot of Internet bandwidth.

Higher price, but no added value

Many, many users seem to be extremely upset about the price increase, and the reason is  that Netflix hasn’t added any value for the price. It’s true that while the streaming service is pretty robust, it’s a fairly small library, especially compared to Netflix’s DVD service, which includes something like five times the titles that are available through streaming. Netflix’s streaming business also suffers from a lack of current offerings – generally, TV shows and movies need to come out on DVD and then be secured through alternative deals before they appear on streaming.

Perhaps in response to the backlash – Netflix has received better than 40,000 negative comments on its Facebook page over the hike, according to a story from Mashable – the company announced today a new deal with NBC Universal that extends its TV content on the service and adds many films, as well, Mashable reports.

The deal maintains NBC content such as “The Office” on Netflix, while adding additional shows including “Leave It to Beaver” and “Law & Order: SVU.” The terms of the deal haven’t been disclosed, but the Hollywood Reporter speculates it could run Netflix as much as $300 million per year. That’s up from just $25 million for Netflix’s previous deal with the content provider. Add to that the cost Netflix paid to add the AMC show “Mad Men” to its roster, which was reportedly between $75 million and $100 million, and one might wonder if Netflix shouldn’t have raised prices sooner.

Still, Netflix is continuing to add support for its streaming service and it should be reaching additional Android customers in the future as the company works to make it available for more devices. The streaming service only jumped to Google’s mobile operating system within the last few months, and the addition of new devices to the app’s line-up has been slow-going, it seems. It’ll be interesting to see if the price hike has as big an effect on Netflix’s user base as those users would like Netflix to think – and if support for additional Android devices will help to counteract any bad blood customers might be experiencing.