Netflix is jacking up subscription prices; what will you do?

July 13, 2011, 7:39 AM —

Well, it was nice while it lasted. On Monday we were happy, content Netflix customers getting a great deal on streaming content and DVDs. Then Tuesday it all came tumbling down. Early in the day there were a rumor circulating that Netflix would be raising its prices, and just a few hours later that rumor came true.

We're talking about significant increases, too. In my case, I currently pay $11.99/month for unlimited streaming and 1 DVD or Blu-ray disk out at a time (Blu-ray adds a $2 surcharge). After September 1st (when the new prices go into effect for existing customers), my bill will increase to $17.98, about a 50% increase in price.

[Also see: Netflix HD streaming coming to non-existent Android tablets. And Latin America. and Your cable box is an extreme energy hog]

Netflix is trying to spin this as a way to offer unlimited disks for the lowest prices ever: $7.99/month for 1 disk at a time and an unlimited number of disks every month, so I guess for the disk-only subscribers (who'll be getting their very own subdomain: http://dvd.netflix.com) this is good news.

Subscribers who only use streaming also won't be bothered. They'll be paying $7.99/month too, which I think is what a streaming-only plan cost before the updates.

It's those of us who're hybrid users that are really getting screwed. If you like streaming but find you need to supplement it with disks due to Netflix's limited streaming selection, you're going to be paying for that luxury. You'll have to subscribe to a $7.99 streaming plan and a $7.99 disk plan, with no bundle discount (and that $2 Blu-ray surcharge remains).

What really gets my nose out of joint about these changes is that Netflix so often has gaps in its streaming coverage. I watch a lot of TV series via Netflix streaming and far too often I'll find a few episodes in a season (and sometimes an entire season) will be 'Disk only.' Right now that's an inconvenience, but after September 1st it'll feel like extortion.

So, attempts at spin notwithstanding, why the price hike? Netflix does eventually cut to the chase in the blog post I linked to above:

...treating DVDs as a $2 add on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs.

(GigaOm has an interesting post on the topic: Why Netflix changed its pricing plans.)

I find the way Netflix phrases its justification interesting. As a long-time (pre-streaming) customer, I felt like I was getting streaming for an extra $2/month, but Netflix sees these accounts as streaming accounts with the DVDs as the extra feature.

We already knew that Netflix saw streaming as the future, but this little factoid really cements the idea. Honestly I do use streaming a lot more often than I watch disks; often I'll have a disk sitting on my coffee table in its unopened red envelope for weeks or even months before I get around to watching it. Come September 1st I'll be dropping the disk from my plan and go with a pure streaming service, and Netflix will be getting $4/less from me every month. I can't believe I'm that atypical, but I suppose they've run the numbers and the overall impact on their bottom line will be a positive one. In fact, it could be that I'm doing exactly what Netflix wants me to do: dropping the disks.

I was at my day job when this news first hit. I talk about tech news fairly often at work, and never has a story gotten so much attention as this one. We had about eight people standing around thrashing out the prices and decided what they were going to drop. Interestingly no one said "I'm quitting Netflix" and no one said "Oh well, I'll just pay the higher fees." Everyone was deciding whether they should keep the disk service or the streaming service (and as a result everyone would end up paying less than they are now). Granted this is one office and we're a pretty geeky bunch, but I still found it interesting. Around the web, a lot of people have pretty vocal opinions (almost universally negative) about the price hikes, too.

The truth is that for heavy users even $17.98/month is a good deal, right? But for those of us who use Netflix to 'fill in the gaps' around cable TV watching, it feels pretty steep. If you're currently a Netflix subscriber who uses both disks and streaming, what are your plans come September 1st?