"Consumers are used to paying more for high-definition," Netflix chieftain Reed Hastings has said.
Why buck the trend, even in the crappiest economic times that anyone outside a nursing home can remember?
As a shareholder, I guess I should be happy that the DVD rental giant is tacking on a $1 a month surcharge for customers who rent Blu-rays. But as a card-carrying early adopter -- the kind of customer who made Hastings a multimillionaire back in the 1990s -- I'm pissed.
Yeah, it's only a buck, but if you're paying $4.99 a month, that's a hefty increase percentage wise.
(Update 10/21: Netflix projects 500,000 Blu-ray subscribers by the end of the year. That means the $1 fee will generate something like $6 million a year. That's not a big deal when you look at Netflix revenues -- something like $340 million this year -- but if you choose to look at this fee as pure profit it's almost a third of the current net income.)
Keep in mind that this fee simply applies if you've ever rented a Blu-ray or indicated you're likely to do so. Not just if you're actively renting Blu-rays.
Why would Netflix customers with the HD hardware not rent Blu-rays? Check out these beefs from the comments on Netflix's blog:
"It would be one thing if it was only a dollar and I could actually get a Blu-ray movie from my queue" ... "They always seem to be out" ... "Most of the movies in my (queue) are not available in Bluray and the 15 or so that were in Blu-ray had a Long or Very Long Wait on them" ... "Every time I add a Blu-ray to my query it says 'Very Long Wait' or 'Long Wait' "... "If you want to charge extra for HD movies, you better make damn sure that you have them in stock."
Dig deeper and you'll find repeated complaints about Blu-ray discs arriving cracked, apparently more sensitive to breakage in paper sleeves than regular DVDs.
Netflix could make a reasonable argument that since Blu-rays cost more than DVDs -- something like 25% more -- that the fee is appropriate. And perhaps Netflix will use the rate hike to purchase more Blu-rays. But why should early adopters pay in advance, when the current Blu-ray service is so freaking flawed?
Also, let's consider the overall value of Netflix's goods -- the zillions of video discs owned by the mail-order rental giant.
DVDs are cheaper than ever. Take a look at Amazon's prices, and the prices offered by its third-party sellers. In some cases, you'll pay more for the shipping than for the disc. Consider "Be Kind Rewind," a new release of a good movie with a street value of only $6.50 -- $4.74 if you buy a "like new" disc that's probably new and unopened.
Hell, even Netflix gives away big studio titles like "Spider-Man 3" via its streaming video service, Watch Instantly.
Then there's the TV-on-DVD titles, whose content is routinely available on online video services such as Hulu.
Given the massive loss of intrinsic value in its core product, you'd think Netflix would be working overtime to keep existing customers happy. Or at least, being careful not to "wake the dead" (inattentive subscribers), many of whom now will be thinking over the value of a disposable service that angers them in a time of economic crisis.
I don't think that the price increase is exorbitant but personally, I really don't care whether I'm watching high definition or blue ray. My eyesight is going slowly and surely anyway.
Evan
www.beyondrace.com
Posted by: Evan | October 10, 2008 at 11:59 AM