12 July 2011

"Separate but Equal" Netflixes

Netflix announced new payment plans today, effective 1 September.  It will now cost $7.99 a month for unlimited streaming or unlimited, DVD rentals (one disc out at a time).  If you want streaming and discs, you pay the full $7.99 for each service: $15.98 a month.  Additional DVDs out at a time cost more, and they are keeping their Blu-ray Disc surcharge for disc renters who want Blus.  Currently, it's $2 to add Blu-ray Discs to your plan, and then an additional $1 per disc in your plan.  So if you're on the 3-DVDs-at-a-time plan, you would pay $4 a month in Blu-ray surcharges.  Unlike all previous Netflix payment plan changes, they are no longer respecting previous arrangements.  Whatever plan you have now will not be grandfathered into effect in September.

Now, I understand that the studios are making it harder on Netflix now that they've seen what a successful streaming model looks like and they think they ought to have a bigger piece of the pie.  And I'm acutely aware that Internet service providers are erecting their own barriers through bandwidth caps and efforts to block Netflix outright to some devices, prompting expensive lawsuits.  What upset me with today's announcement was the announcement itself, in which the following explanation is offered for the changes:
Last November when we launched our $7.99 unlimited streaming plan, DVDs by mail was treated as a $2 add on to our unlimited streaming plan. At the time, we didn’t anticipate offering DVD only plans. Since then we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members. Given the long life we think DVDs by mail will have, treating DVDs as a $2 add on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs. Creating an unlimited DVDs by mail plan (no streaming) at our lowest price ever, $7.99, does make sense and will ensure a long life for our DVDs by mail offering. Reflecting our confidence that DVDs by mail is a long-term business for us, we are also establishing a separate and distinct management team solely focused on DVDs by mail, led by Andy Rendich, our Chief Service and Operations Officer and an 11 year veteran of Netflix.
The entire thing is predicated on the argument that leaving things as they were does not "make great financial sense!"  This is the corporate equivalent of, "My bad; I didn't realize I didn't have to settle for less than this."  In the past, a company would have had the decency to spin this kind of increase in rates by saying something like:
We regret that changes in the market have made it necessary to revise our payment plans.  Rest assured, we intend to see that every one of our valued customers gets the most value for their dollar.  Thank you for your understanding.
Would we have all seen through it and read that it really meant, "My bad; I didn't realize I didn't have to settle for less than this" anyway?  Of course we would.  But at least then we would have felt respected by their charade.  This press release sends the message that they didn't even consider us worthy of the charade.  This kind of thing smacks of a corporate policy born out of the "They'll Get Over It" doctrine.

Insulting press release language aside, the greater issue here is the creation of two "separate but equal" Netflixes.  DVD Netflix dwarfs Streaming Netflix, but Streaming Netflix has the advantage of being instant.  On the other hand, the streaming library is dictated entirely by the studios, whereas Netflix can circulate DVDs and Blu-ray Discs even when the title goes out of print.  Still, DVD Netflix customers must choose their DVDs wisely and go through the process of receiving, watching and returning.  Even if you received a DVD in the morning, watched it and returned it in time to go out with that same day's post, and even if you received the next DVD the next day, you're only getting to watch one DVD a day--and that's at best.  Figure the mail doesn't even run on Sundays and you're already down four or five DVDs a month (depending on the calendar).  That means you get--at best--25-26 DVDs.  In all likelihood, there will be a one-day turnaround between discs, meaning you're really getting 12-13 DVDs a month.  I can stream 12-13 movies in two days.

Until this, DVD Netflix and Streaming Netflix complemented one another and each compensated for the deficiencies of the other.  I could stream movies while waiting for a title not available for streaming to arrive on DVD or Blu-ray Disc.  I had access to their entire library, whether physical or digital media.  I have often defended the Watch Instantly library, arguing that there's a lot of rich film history worth exploring, as well as indie gems, that can be streamed.  I've seen movies I would never have even known about had it not been for Netflix Watch Instantly.  Case in point: just last week I streamed Aelita, a silent Russian science-fiction movie from 1924 made within three years of the October Revolution.

The message from Netflix now is that there will be three kinds of Netflix subscribers.  One will be omnivorous, paying as much as both of the others combined, for that subscriber will receive no discount.  The other subscribers will be "separate but equal."  It's this kind of "pros & cons" contrasting that ultimately leads to only one certain conclusion.  The two Netflixes may be separate, but they are only equal in price...for now.

I will not pay $15.98 a month to be a first-class citizen.  Nor will I cancel my subscription as many say they will.  I am, however, strongly considering suspending my account until such time as a more palatable payment plan is presented.