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Old July 13 2011, 03:04 PM   #68
Robert Maxwell
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Re: Netflix shoots itself in the foot... aka no more free streaming

KB24 wrote: View Post
I get that they are increasing because of the rising fees and studio costs and all that. But the stock was up, expansion and clientele was growing. Twice as many people at the old rates would make the same money as half as many people on the new rates. Netflix has the power to make the studios play ball but instead they are joining the screw the little man. I liked them much better when they were small or underground, like vampires, Christian Bale, Gerard Butler. Bigger is not always better.
Although there are a lot of posts I could respond to, this one seems to distill the "conventional wisdom" about the issue. And it's just incorrect, sadly.

Twice as many customers means they have to scale their infrastructure more, which means more overhead, which means they are making less money per customer.

Netflix does NOT have leverage over the studios. It would be nice if they did, but they don't. The studios own the material--they can pull it anytime they like. They don't have to let Netflix license any of it. If they think Netflix streaming is cannibalizing DVD sales (and it's quite likely that it is), it makes sense for them to demand higher licensing fees from Netflix.

I do think it sucks that some people have to pay more for what they're already getting or choose to give up part of the service, or even just walk away entirely. But that's the reality. In this economy, everyone is looking for ways to save money and methods to generate additional revenue. Netflix is just trying to scale, keep their customers happy, and keep things available for people to watch. It's a tough balance. I've never gotten the impression that Netflix is out to screw their customers--in fact, customer service would appear to be their entire purpose, considering you could go out and get the same TV shows and movies anywhere else.

I just don't see them doing these kinds of rate hikes unless they had to, because they have to know it will hurt their customer base. When your overhead costs go up (like licensing), you have to make it up somewhere, and I don't see where else Netflix would make it up except by raising prices. They are a company and have to make a profit, after all, and it wouldn't make a lot of sense for them to deliberately slash profits for the sake of growing the customer base. Over time, this produces a negative profit curve and the company would not survive.

People are free to use Netflix or go elsewhere, I just don't think it's fair to accuse them of being money-grubbing bastards trying to squeeze a few more bucks out of loyal customers. The studios, as usual, seem to be the real bad guys here.
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