60% Price Hike for Netflix

At a time when consumers are tightening their discretionary spending in the face of a tough economy, Netflix announced that they will be raising prices by 60% from $10/month to $16/month for streaming customers who also rent one DVD at a time.  With Netflix earnings soaring from rapid subscriber growth and declining postage expenses, Netflix subscribers have reacted angrily – 27000+ Facebook comments expressed their dismay.  It is somewhat ironic that the company that destroyed the brick and mortar DVD rental business might be sending its customers back to brick and mortar companies like Redbox.

At present time, most of the library on Netflix is only available on DVD and the few streams that are available are often only available at lower resolutions and lower bitrates (0.5 Mbps from my measurements).  Netflix has been busy complaining about ISP peering capacity but the bottleneck seems to be mainly at Netflix’s end with a shortage of streaming titles, especially those in HD.  Many customers want the 2-day DVD delivery available any time but they end up being too lazy to bother mailing DVDs (I’m guilty of this).  This price hike seems to be reminding a lot of Netflix customers that they are paying for a DVD rental service that they hardly ever use.

Every Netflix subscriber I know is fuming.  Thousands have already threatened to cancel, drop to a lower tier service, or put the Netflix service on probation to see if the online streaming library gets beefed up.  Gigaom compiled a sample of comments across the web.  While this is the kind of response one would expect when prices go up 60% overnight, if these reactions are representative of Netflix customers, the company has a public relations disaster on its hands.