This week, Netflix stunned the entire world by being the first company ever to raise prices. No wait… that's not accurate. I guess it just feels that way because of all the hyperbole and trumped up outrage. Every tech blogger worth his salt has published either a condemnation, or an article about how mad everyone is about the move. Well let me be among the first to suggest that the Netflix price hike is no big deal.
In fact, when I read the news, my exact reaction was nonverbal. It was a shrug. It took me all of three seconds to do the math in my head and realize that $15.98 per month is still an insanely good price for the amount of content I get out of the deal. That's it. I didn't get angry, or even feel compelled to sign an online petition or leave a negative comment on the company's Facebook page.
Why? Because sometimes companies raise their prices. For example, I went to Wendy's the other day and ordered a large iced tea. It cost me roughly $3. But five years ago, it was much closer to $2.
The food industry has been making a killing throughout this whole messy U.S. recession by repackaging–selling us less product for the same price we're used to (The Consumerist blog calls it the "grocery shrink ray"). Since we're silly Americans, we don't look at package sizes, and just see the same price we always pay, and go on about our shopping. Don't believe me? Look at a half gallon of ice cream sometime, because it's got less than half a gallon in it these days. At first, they just dropped down to 1.75 quarts, but most of them are now selling 1.5 qt. containers for the old half-gallon price.
But we like ice cream. Some of us probably feel we need it. So we don't throw a fit in the freezer isle, we just grin and bear it.
Gas prices go up almost every day, it seems, with the national average hovering near $4/gallon. And yet, I can vividly remember paying a mere $0.78 per gallon one glorious summer in 1998. And no one likes it. But we need gas, right? So we keep paying it.
Let's try and example that's at least in the same field: movies. How much did you pay per ticket the last time you went to the multiplex? $9? $10? Even more if it was a 3D show, right? Not so long ago it was $7, and most of you can even remember when movie tickets were cheaper than that. And don't get me started on the popcorn.
Similarly, Blockbuster used to charge $2.95 for a new release rental, and now charges over $5.
Are you starting to see my point? People need to chill out about Netflix raising their prices because they're only, like, the millionth company to do that same thing in the last year or two.
Now… don't get me wrong. I'm not saying you shouldn't be upset about it. You have every right to be. No one wants to pay more money for stuff. I get it. I'm not exactly doing cartwheels about it. But skimming the headlines on Google News, you'd think this was on par with the BP oil spill or something (which, incidentally, it is not… not even remotely). Here are a few:
- Dear Netflix, I'm Breaking Up With You
- Some Netflix Customers Threaten To Quit Over Price Increases
- Netflix Hikes Rates, Feels Rath
- Redbox Waits In The Wings After Netflix Price Hike
- Netflix Customers Jam Phones Over Price Increase
- The Great Netflix Shaft
- Up To 41% of Netflix Users Plan To Cancel
- 7 Reasons Why Netflix Price Hike Is A Bonehead Move
- Netflix 60% Price Hike, You've Got To Be Kidding Me
And that last one hits on the real issue here, I think, which is focusing on that percentage instead of the dollars. Previous subscribers to both the DVD and the streaming services paid $9.99. Now they'll be paying $15.98. If you look at percentages, that's a whopping 60%, which is a large number. But if you look at the dollars, it's only $5.99.
And when I add up how many DVD's my wife and I go through from Netflix in a month, plus the number of movies and TV shows we stream, the fact is that $15.98 is still super cheap–far cheaper than Blockbuster and even Redbox would be.
Besides, looking at the percentage isn't really fair. I mean… if I sold lemonade at a lemonade stand for a penny per glass… but then the next week started charging two cents per glass, would you really complain to me about my prices going up 100%? No, of course not. Because a penny is negligible, and so is two pennies. So… the actual dollar amount matters far more in the price hike than the percentage does.
This price hike comes to an annual increase of $72. That's less than one average month for Comcast cable in my area. I humbly submit that if $6 a month extra is going to kill your budget, maybe you were stretching it to be a Netflix customer to begin with.
I'm not the first to defend the move:
- Over at Time's Techland blog, Matt Peckham explains why the price hike doesn't bother him. Here's the short version: the service was underpriced from the get-go.
- E.D. Kain at Forbes wrote a piece called "Why The New Netflix Pricing Makes Sense." And why does it? "Netflix has always been underpriced."
- Hmm… sensing a trend here. Let's continue, moving to David DiSalvo–also at Forbes–who says the DVD price hike is a good thing. Why? Because the ultimate goal is to push out DVD's. Netflix knows that streaming is the future, and is simply trying to nudge customers toward that conclusion. (Wired concurs with this logic in their own article on the subject).
This is not Armageddon. It's just… prices going up. It happens every day all around you, but for some reason… this particular increase has struck a nerve. I'm not saying you should go out and do the dance of joy at the added expense. I know times are tough for everyone, and every dollar helps. But I am saying we need to put the hyperbole to bed, and put away the pitchforks.
Netflix has a long history of a great product with great service, and it's been undervalued by consumers for some time. I'm sure there will be some who leave in protest. But sadly, they're going to find much higher prices at Blockbuster and a significantly limited selection at Redbox.
Also, I think people are all worked up about this mostly because of the shock. Netflix didn't exactly handle the announcement with much grace, merely sending an abrupt form letter informing customers the prices were going up soon. I think once people get over that shock, and begin to really stack Netflix up against other options, they'll see that $15.98 is still a pretty darn good price for the service.
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