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Netflix Price Jump Always in the Cards

1 Aug, 2011 By: Stephanie Prange

Netflix is looking a little less golden these days, as it instituted a price increase for customers to get both streaming and disc rentals, and competitors have stepped up their game.

Amazon, in addition to its former streaming deal with CBS, has inked a deal with NBC Universal. Walmart, through its Vudu service, has gotten into streaming as well.

Consumers should have known the free ride on streaming wouldn’t last forever. I remember, as a college student, comparing prices for trips to New York between People’s Express and Continental. People’s Express had my business until Continental decided to match their price while offering all the amenities of a major airline. I didn’t have to bring my own lunch on Continental; meals were free.

But that free meal for the same price didn’t last long. As soon as People’s Express went out of business, Continental raised prices.
The same thing is now happening in the home entertainment business. In comparison to Blockbuster’s plan, Netflix for a while had a clear price advantage. You could get disc rentals as well as unlimited streaming (something Blockbuster couldn’t match) at no extra charge.

Now, Blockbuster has gone bankrupt, and — surprise, surprise — Netflix is starting to charge separately for streaming.

Consumers may howl and complain, but the fact is, the free ride couldn’t last forever. Once Netflix knocked down Blockbuster, the company would need to raise prices to keep expanding its streaming content and its international business.

Does no one remember the original price points for Netflix before Blockbuster got into the subscription game? They were much higher. It was competition from Blockbuster and, at one point, Walmart, that pushed Netflix into the $8 streaming plus disc rental low-priced plan.

Now that Netflix has defeated most of its former competitors, naturally it is going to raise prices, pushed by the studios’ increased salivating over getting more of the streaming pie.

But nothing attracts competition like success, and Netflix itself may face an onslaught of competitors in both the streaming and physical rental (Redbox comes to mind) businesses.

While I sympathize with consumers who had been used to the great deal Netflix offered, I must reiterate the old maxim, “If it’s too good to be true …” — you know the rest.

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