September 19, 2011

Netflix, you are stupid. (One consumer's perspective)

In case you haven't heard, Netflix is at it again. First they raised prices (a de facto 60% price increase for subscribers of both streaming and DVD-by-mail service). Now, they're "apologizing" for messing up... while making it worse. Not better.

For the record, I can see the sense in raising prices of the DVD-by-mail service. Before the switch, I was paying $7.99 a month for unlimited streaming, + $2.00 flat for 1 DVD out at a time. I don't know about you, but I can go through those DVDs like nobody's business. Let's assume that I have 2 DVDs out a week (reasonable if I watch each DVD the night I receive it and mail it back the next morning). That adds up to about 8 DVDs per month. $2 doesn't even cover the shipping fees for that service. We can quibble about the exact price charged, but $7.99 for this plan makes sense if Netflix wants to, say, make money off of it. And I'm assuming for the moment that they do.

I disagree with the implementation of the price change in two ways. First, I disagree with the way it was presented. Seriously Netflix, you need a whole new PR department, because selling a price increase by saying that you want to satisfy your customers? SUCH a bad idea. How about going with the honesty approach? Tell us that charging $2 for a DVD service isn't sustainable, that you're losing money. Tell us that you are paying more for renewals of streaming licenses, and to keep the quality content, you need a price increase. Netflix, your subscribers aren't stupid. The way you handled that first price increase, PR-wise, was a nightmare.

The second (and perhaps more important) problem I have with the price increase was that it doesn't have a bundled price for people who want both the streaming AND DVD services. I understand that the whole point was the separate out the streaming and DVD services, but bundling really is everywhere. The whole pill would have been easier to swallow if Netflix had provided that option. Want streaming only, or DVDs only? Pay $7.99. Want both? How about a low price of $12? The price would have gone up, but it would have been a smaller leap, and it would have been a recognition of the large segment of customers (like me) who use both services. Netflix has great content in both the streaming and DVD libraries. But until there is a significant increase in the amount of overlap, it's not realistic to expect that customers will be satisfied with the offerings from only one option.

...And that's what they seem to be doing with this newest snafu. Please refer to the article I linked to above, but the gist of it is: Netflix is dumping its DVD program. From here on out if you're a Netflix DVD subscriber -- oh wait, you're not. You're a Qwikster customer. Netflix, that was stupid. Stupid, stupid, stupid. There may be good business reasons for doing what you're doing, but there are NO good consumer reasons. So if you want your consumers to stay happy, you'd better provide one hell of an explanation, or just stop this nonsense before you sink the whole ship. Let me tell you about what I care about as a consumer:

1. Content. Netflix, you seem to be under the impression that I care about whether I get my media via streaming or DVD. The truth is, I don't. If your entire library was available on streaming, I would probably be a streaming-only customer. But since it's not, I use the DVD service. Consumers don't care about DVDs vs. streaming issue nearly as much as they care about the content. Lesson #1: Keep the CONTENT together. If you make me log into two different websites just to search the same company's database to see if a particular movie available, I'm going to want to strangle you. And I will most likely be canceling my DVD service. Same thing with the ratings. Do you really think that I'm going to rate things twice just to get the same suggestions in two different places? Your suggestion algorithm has shown me some gems, but splitting it down the middle like this seems like a horrible idea.

2. Convenience. Two websites? Two lists? Two bills? Need I say more? People don't want to log on to two sites to search for one movie. It seems likely that many will let go of one or another, in favor of one of the other services (Amazon Prime, Hulu Plus, Blockbuster Express, etc.) currently on the rise. And if anyone comes up with a site where you can do both, I imagine we're going to be seeing a much faster drain as current Netflix subscribers jump ship to a new site that will be (effectively) what Netflix just abandoned.

3. Affordability. Truthfully, I don't think there's an issue here at the moment. If you use both services actively, $7.99 per is actually pretty reasonable. But again, it would be so much more convenient if you'd just kept them together in the first place.

The bottom line, Netflix, is that from a consumer's perspective this makes no sense whatsoever. You are taking away convenience. You are taking away content. You are annoying people, period. See the following for more coherent (and knowledgeable) opinions of this mess: here and here.

For the moment I'm staying with you. Even with the increase, it's still a reasonable price for the amount of content I watch through Netflix each month. But if you keep making decisions like this, it might not be that long before I'm saying goodbye.

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