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Netflix Raises Rates

July 13, 2011 | Author: Ibex Marketing

Netflix has raised its rates. Get over it.

Apparently there has been a firestorm of protest over Netflix raising its rates this week. The focus is on the company increasing the rate by 60% for some subscribers. That’s sounds pretty egregious, but let’s break it down.

There used to be a plan that gave you one DVD at a time by mail for $8.99 a month, and you also got unlimited access to the online streaming at no extra charge. Then the company made a commitment to the streaming business and offered a $7.99 a month plan for streaming only, or $2 more a month if you still wanted the one DVD at a time service. (Given that most rental stores charge about twice that for a single rental, that’s a pretty good deal. And you’d only get two DVDs a month for $2 from Redbox kiosks, compared with the dozen or so you could get from Netflix if you watched them the day they came in.)

So guess what? Netflix has decided that $2 a month for one-at-a-time DVDs is a money-losing proposition. And now they are giving you a choice: for $7.99 a month, you can get either unlimited streaming, or you can get one-at-a-time DVD by mail service. So it is true that if you want to keep getting what cost $9.99, it will now cost you $15.98. Or you can just get the unlimited streaming and go to Redbox twice a month for DVDs with your $2 extra a month.

It’s not difficult to have seen this coming. Mail is expensive. DVDs are expensive. Netflix figured that most subscribers would be happy with the streaming service and would switch over to that. (And many millions have done just that.) Netflix has to spend a lot of money for the licensing rights to the streaming content; it is bidding against cable and satellite services for much of the same content, after all. So it’s going to take more money for Netflix to keep expanding its library and to bring us more of the recent and “good stuff” content. This all means that if you want to continue to get DVDs in the mail, you’ll have to spend a little more for them. It just makes sense.

If you want to be able to choose between tens of thousands of movies and TV episodes whenever and wherever you want, you need to expect to pay for it. And if you want to hold onto the legacy technology of polycarbonate discs showing up in your mailbox, then you’re going to have to pay for that too. I think Netflix is on the right track with its streaming service, and that it is getting noticeably better each year. And I think that $8 a month for that is a bargain.