July 13, 2011

Netflix Raising Prices

In an announcement that angered a great number of people, Netflix has announced that they will be redoing their pricing plans.  Currently users are able for $9.99 to get 1 DVD and unlimited streaming.  Netflix, starting in September, will be separating the two services.  The new pricing scheme is such 1 DVD out for $7.99 or unlimited streaming for $7.99 or both for $15.98.  This statement led to outrage because users were furious with the fact that they had to pay more money.  Netflix is also in the process of renegotiating their streaming contracts and as such several studios have pulled their movies from Netflix instant streaming.

While I don’t like the price change I think people need to look a little deeper into the price increase.  Most people think “I’m just steaming a moving how much can it really cost” and the answer is… alot.  First there is the bandwidth required to deliver streaming services to everyone who wants to watch it and sometimes on multiple devices.  Bandwidth isn’t cheap in mass quantities that would be required to serve users across the world.  Currently Netflix uses level 3 communications for all of their bandwidth needs and they probably use a good portion of that companies bandwidth.  The bandwidth alone probably costs the company over a million dollars a month just to keep data flowing to consumers.  That’s $12 million dollars a year.  That’s not chump change by any measure.  Then in addition to this they have to pay licensing fees to movie studios to have the right to show their movies online.  When Netflix first started offering this service they got a steal on licensing because no one really watched movies online.  Now, however, there are millions of people who are using the internet to watch their movies and movie studios know that they can make a killing and as such they are going to raise those costs.  Lets take the average TV show for example, it costs netflix around $100,000 to $1,000,000 per episode to have the rights to stream any given season.  Lets take Star Trek: Voyager, it has 100 episodes, that’s $10,000,000 just to have the rights to stream that to consumers and thats only one show.  Multiply that by the hundreds of TV episodes they have available and you get an idea of the immense cost of operating that kind of business.   Those costs have to be paid for somehow and if movie studios and bandwidth provides raise their costs so does Netflix, it’s just simple business. 

What do you guys think?

5 comments

  1. Tibia Guide - January 21, 2012 1:48 am

    It is just taking over, but as for block buster all the local stores are petty much out of business

    Reply
  2. thsoundman - July 14, 2011 9:41 pm

    I should also bring people back 10 years to the era of block buster… remember renting movies from their? 3 day rentals at $6.99 plus if you brought the movie back it was at $6.00 late fee. You could spend $14 in a day and only get two movies. With netflix you could potentially get 30 movies a month. The cost to benefit ratio is sky high and that doesn’t even include being able to stream them over and over again whenever you like.

    Reply
  3. thsoundman - July 14, 2011 9:14 pm

    That was my thought exactly. 15 dollars a month isn’t that much. Thats really not that much at all really when you consider how much people currently spend on TV. If you have medium/top tier cable packages your going to be spending around 100 dollars a month… maybe 70 if your on satellite and thats if you don’t have any movie channels. Movie channels can run you $15 dollars a month per channel so you can easily get your bill up to 130 dollars without thinking about it. Netflix is a measly 15 dollars a month and thats if you need both services. PErsonally I only use the streaming so it works perfectly for me and then I supplement that with Hulu and it costs me a grand total of $15 dollars a month for damn near everything I want except for sports.

    Reply
  4. Rachel - July 14, 2011 9:11 pm

    I love Netflix and I don’t mind an increase because I watch it so often. I think the most I would pay would be $15 a month for it.

    Reply
  5. ScrotusKilmystr - July 14, 2011 3:58 pm

    I can understand the increase BUT how they are treating the subscribers is wrong basically telling us to ‘deal with it” they need to get better content on line to keep exsisting subscribers, like me, and to stay competitive with other services like Amazon…

    Reply

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