Netflix Pricing

Gary North

Sept 11, 2011

On September 19, Netflix users must decide: streaming videos only ($7.99) or streaming videos plus DVDs by mail ($15.98 for one at a time, more money for more than one).

We are on the streaming-plus-one plan: $9.95. We have just switched to streaming videos only.

The choices are limited. The movie companies will not authorize their latest releases for streaming video. This is probably not going to change soon.

Why did we cancel the DVDs by mail? Because we find that we are not watching movies that often. When we do, the old ones are OK. There are not that many must-see new releases.

If we really want to watch a new release, we use Redbox. My wife goes shopping. She can rent a video for $1. She must return it the next day or else pay $1. In terms of her shopping time, Netflix by mail is better. But in terms of time spent in front of the TV watching a recent movie, Redbox is better. We watch only what we really want to watch with Redbox.

She likes to watch home repair shows. She knows how to make stuff. She just made me a 4-section desk for my new office. She watches several how-to shows a couple of nights per week. She has set the cable box to record them automatically. She can fast- forward through the ads -- a major time-saver.

The grandchildren are content with watching the same full- length cartoon several times. (This month, it's "Tangled.") The Netflix streaming video selection is sufficient.

Some families are trapped, but not for long. Alternatives are coming, slowly but surely. Here is an article on this.

Netflix's share price is down 25% over the last month. The public senses a big mistake at Netflix. It was a mistake with me, surely. But I may not be typical.

Anything that gets people away from the TV is positive for the economy. Netflix is helping to remind us: free time is not free.

I think Netflix will remain profitable, but the Web is inevitably going to add competition. Senior managers at Netflix have seen their stock options lose a lot of value over the last 30 days. The pricing change has served as a wake-up call for investors: "Netflix's income stream cannot last."

The Web is better than movies. Our time is better spent watching videos than movies. It is getting easier to watch videos. It is getting more expensive to watch movies. This is why Netflix will inevitably lose market share, not its new pricing schemes. The new pricing merely called investors' attention to Netflix's future. It was a wake-up call. I woke up.

One other thing. Whenever I log in, I get this message: "Your Email Address Is Invalid. We have been unable to send you email, regarding your Netflix membership, to the email address on file for your account. Please visit the Email Address and Password page in Your Account and enter a valid email address." I find that their system ignores my updates. Always. The technicians are asleep at the wheel. Management does not notice.

Netflix is in trouble. The share price says so. There is nothing like a falling share price to reveal problems.

One of my site subscribers has a different approach.

So now, we get two DVDs and no streaming ($11.95). Not everything on DVD is available on streaming, which is why we prefer the DVDs. But that still leaves the problem of what to do if we want something instantly. We've mostly solved that, as described below.

The trick is to "time-shift" the DVDs. We already have a $99 AppleTV box, which I was using mostly for playing music. AppleTV connects to your home network on one side, and to your TV and to your sound system on the other side. When you run iTunes on your home computer, the AppleTV can play any music or videos that are in your media library on that computer.

So, whenever we receive Netflix DVDs in the mail, I immediately pop them into the DVD drive on my home computer, and use a program to "rip" the content onto the computer's hard drive. (I use AnyDVD Cloner Platinum [$50] but there are many such programs, including free ones.) Depending on what errands we are running on that day, we often can mail the ripped DVDs back to Netflix on the same day we receive them! Then we watch the shows at our leisure, and there's always something that interests us in our slowly growing library.

We have been doing this now for about 3 weeks, averaging 2-3 round-turns of the DVDs per week, and we now have a backlog of about 3 movies and a dozen TV episodes to watch. And we watch something almost every night (you get 2-4 TV episodes on most TV-series DVDs). We delete the shows from our library after we watch them (storage requirement is about 700-800 Mbytes/hr of video).

I figure it is costing Netflix about $1/disc just in postage for a round turn. So, even with just two round-turns per week of two DVDs, we're costing them $16/month in postage for our $12/month subscription. If a lot of people do this, they will clearly have to change something. But I thought I would share the idea anyway. A friend of mine turned me on to the technique.

One final comment, I fully subscribe to Dr. North's advice that time is your most precious asset. But it only takes me a few minutes per DVD to start the copying/ripping process in AnyDVD, add it to my AppleTV library, and eventually delete it. (The actual copying/ripping process takes 30-60 minutes, unattended.) That's also why I sprang for a paid program (AnyDVD) instead of trying out a bunch of free ones to get something acceptable.

That's surely creative.

For over 270 more tips, click here:

http://www.garynorth.com/public/department54.cfm