Thursday, July 21, 2011

Netflix Streaming – The Controversy and the Price Hike

From the very beginning of my period of unemployment, I've had to stretch my entertainment dollar as far as it will go. Gas prices the way they are, this also means that a lot of my entertainment (aside from the occasional movie or social engagement with friends) has to also be delivered to me, rather than having me fire up the Ford to go to it. In my wild and reckless youth, I'd have had a simple solution. I'd have pirated until my (1 TB) hard drive could take no more. As I've grown older, and hopefully wiser, I've approached what little media piracy I engage in with a personal ethical code. Something has to be: unavailable in the format I need it in when I need it for a reasonable price in order for me to pirate. I've long said that if a fair-priced and convenient legal alternative is available, I'll use it in order to support another solution to the piracy problem aside from random thuggish lawsuits. I've talked a lot about Steam, and how it reduced my game piracy to almost nothing, but for TV and movies... it has been all about Netflix.

This is what I asked for. A fairly priced, convenient alternative to piracy.

A little over a year ago, I decided that a Netflix subscription might be right for me when I was investigating the options on this PC, which is a Media Center computer with a few hardware modifications to allow for gaming. Exploring what I could do to play movies and watch TV on my new-ish computer, I first noticed Netflix streaming. I'd considered Netflix before, but I really don't watch nearly enough DVDs to make it seem worth the price. I prefer streaming digital content when I can get it. Browsing the offerings on Netflix streaming, and seeing that it was included with the “1 movie out at a time” option, made it a no-brainer. I set it up right before we moved in here, and Netflix was waiting for us before we'd unpacked a single box.

I wasn't really surprised when I got the first e-mail with a small price increase. What I'd been getting was a value that was, really, too good to be true, so I wasn't really surprised or angered by that first tiny price increase. More recently, however, I got the e-mail that so many people got stating that September 1st, those of us used to a single DVD and unlimited streaming would have to either choose one or the other, or get hit with a 60% price hike. Like so many others, I sharpened my pitchfork and got my torch ready. So many people are regularly disappointed and mistreated in their business relationships with big companies that it feels like a real betrayal when something like this comes from a company that most of us consider “one of the good 'uns.” Before shooting my mouth off online, however, I decided to do a little research into why this happened.

Recent customer reaction to the controversy found on Reddit.

It appears that Netflix has had some troubles recently, victims of their own success. As compared to a lot of the big media multinational corporations, it is still a fairly small company. In the period of the last few years, though, the streaming option has become so popular that during peak usage hours in the US, Netflix streaming accounts for a higher percentage of all used bandwidth than any other program, product or service. Those big corporations have taken notice of the popularity of streaming video, and they aren't happy that a little upstart company has a foothold in the market and is offering it cheaper than, say, they might choose to price it. The large companies responded as they usually do, by screwing over Netflix in order to run them out of the market so that competing video streaming services can be launched. Several studio contracts with Netflix either just ran out or are about to, and the renewal of those contracts is, in many cases, either off the table entirely or at 10x the previous licensing fees.

I'm still angry, but most of my ire is now directed at the studios that are forcing this showdown to happen. Netflix is taking a beating in the scandal, with irate customers canceling at a rate polls suggest will approach 50% of the current users. Trapped between offering fewer streaming options and raising prices on their service, the company is in a bad spot. If this controversy is the beginning of the end for Netflix, their loss would be a tragedy. I've dealt with the customer service at Netflix as well as the departments at Comcast, Sony, and several other potential players in the upcoming streaming content wars. I have 100% satisfaction with all of my dealing with Netflix on customer service issues, and a terribly spotty history with the giants that want to take its place.

If you're really looking for a villain in all of this...

Personally, the question of what to do isn't a difficult one for me. I'll drop the DVD option, pay a little less on my bill and use the streaming. When content options disappear and only show up on an inferior and more expensive competing service, I won't have a single ethical problem with turning to piracy. I will not reward companies who bully smaller corporations and threaten/pursue legal action against the public with my business. When corporations behave in this manner, I'm not even seeking justification for illegal behavior, they've made it personal. Millions of customers have turned their ire toward Netflix, which after a little bit of online research, seems to be a case of misplaced aggression. Me, I feel plenty aggressive, but Netflix only gets a very little bit of that. The rest is reserved for Time/Warner, Sony, Comcast and the major TV networks.

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Timothy said...

Josh, I talked with Steve Swasey (a Netflix VP) who ran the numbers for me when Netflix was facing some anger over changing the User Interface for streaming content. The cancellation rate there amounted to less than 0.005% of total subscriptions (where the complaint rate was somewhere around 3% of customer service complaints. He hasn't returned any of my calls (yet) regarding the price hike -- I'm not really a journalist, so I understand that -- but from what I gather the cancellation rate isn't expected to outpace new subscriptions.
As for pirating material...I guess I never understood that. The closest I can come to that mindset is how I felt about "porn" when I was 16-17: if 'they' would be willing to sell it to me, I'd be willing to buy it, but since 'they' were not, it was 'okay' to steal it. Truly unjustified thinking on my part.

DocStout said...

The actual numbers on cancellations the day after the price hike announcements were up from the daily norm, but no where near the 50% that polls suggest. The people who huff and puff and then don't actually do anything will certainly greatly outnumber the folks who will actually cancel their accounts.

As for piracy, we come from completely different places on that. I am a former completely unrepentant media pirate who would download without a care for ethical concerns. As I've sorted out which pro-piracy arguments are legit and which are shaky rationalizations at best, my adoption of any sort of personal rules concerning piracy is taking steps toward the center.

faoladh said...

For myself, I still see the increased price as a huge bargain. They're starting to approach the area where I will find it economically unfeasible to continue using the service, but for now it's completely worth it to me to keep the streaming/1 DVD combo. Heck, if my financial situation improves, I'll even switch back to 2 or 3 DVDs.

I am, however, completely with you on the piracy issue.

Alpha said...

Good pirating ethics.

Scott said...

Yours is a well thought out and expressed opinion. You apparently researched and came up with the reasoning behind a 60% increase in some cases that, on the surface now seems justified. The problem I had with it and the reason I canceled my Netflix account completely was the email I got announcing the increase that not only made said announcement, but also basically said, if you don't like it, click here to cancel. Then, to add insult to injury, the VP that came out that day or the day after and the backlash was just getting started said, again paraphrasing, it's only $6. A couple of lattes. And though he didn't come right out and say it, it sounded an awful lot like, "we really don't care if a lot of people cancel, more new ones will replace those that do". I can easily afford the price increase. I just refuse to do business with a company that treats it's customers like second class citizens rather than valuable commodities. Good luck finding a job.

Jay said...

so Netflix is the victim? Damn you Hollywood!!!

Laughing Ferret said...

Very interesting.
I hope Netflix is able to make the public at large aware of the situation behind the new policy.

I enjoy the dvd & streaming option. I might just accept the price increase and continue with both, since many things I want to watch are not available on streaming.

As for piracy, my position is I will pay for, and not pirate, anything that I would be motivated to buy if there was no pirate option. I won't pirate to save money. Conversely, I'll pirate anything that I have a passing interest in, that if there was no pirate option I wouldn't have paid for anyway. If I find it is something I like and want more of, I'll buy real copies of. Completely ethical? No, but I feel fine about it since I'm not cheating anyone out of money: anything I might get pirate free copies of is something I'd not have spent money on anyway.

Bard said...

A very interesting post.

Erika said...

Interesting post indeed. Here in the UK, we don't have Netflix and I had debated in my mind before whether I would use Netflix or not if it were to be available in the UK. I'm still undecided on this one....

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