Is this the chance Netflix rivals have been waiting for?

Jul 13, 2011
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Netflix might have committed a major blunder earlier this week by announcing that customers who had previously paid $9.99 per month for unlimited DVD rentals (with one DVD out at a time) and unlimited streaming will now need to pay $15.98 for the same service.

In essence, Netflix is saying that those who want DVDs and streaming won’t get anything new or better, but they will need to pay more for that right. And as expected, a large group of the company’s customers have come out in criticism of that.

[Image credit: katiescrapbooklady]

But so far, its competitors, including Amazon, Hulu, and even Redbox, haven’t said a word. In their secret meetings behind closed doors, though, you can rest assured that they’re happy to see Netflix make that decision, since they undoubtedly believe it might have a beneficial impact on their operations.

Then again, it might not. Sure, customers who have DVD-and-streaming plans won’t be happy by the news, but do we really think it will be enough to push them to other services? Amazon, Hulu, Vudu, and all the other Netflix streaming competitors still don’t have the same quality of content (or service) to justify a changeover. Plus, folks that have been paying $10 per month and decide to ditch DVDs will see their monthly charges drop a couple bucks.

So, while I understand that some people are upset to see Netflix’s rates rise, we need to remember that its streaming business likely won’t be negatively affected. In fact, I can see the company adding more streaming-only customers in the coming months as it starts offering the plans to new customers, and eventually, existing customers.

The way I see it, the only competitor to Netflix that benefits here is Coinstar. That company, which owns and operates Redbox, is now offering a far better value proposition to customers. Rather than pay $7.99 for DVDs each month, Netflix customers can sign up with Redbox and pay just $1 per day per DVD rental. As long as the respective user typically only rents a handful of DVDs each month, they might just make out well in the deal.

But even then, the impact might or might not be major. As soon as a customer buys eight films from Redbox, they’re matching Netflix’s price. And if they want more, the financially prudent move would have been to stick with Netflix.

Simply put, I’m not quite sure Netflix will lose out with its new plans. It might lose some customers that hate the thought of subscribing to a service that has offered up a 60 percent price hike, but over time, many folks might just realize that even at $15.98, Netflix might still be a better option than the competition.

In the end, it’s an individual choice based on individual preferences. But if a current Netflix user is both a heavy streamer and a heavy DVD renter, opting for the competition’s offerings still might not be the best idea.


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