The Rise of Watch Instantly

Netflix is raising their prices. Again. A lot.

It doesn’t seem that long ago that they last raised their prices, when the first started offering a Watch Instantly plan with no DVD shipments. I’m going to look up the actual pricing history, but first, here is what I recall: Originally, the best value was pretty clearly the 3-at-a-time plan for $17. This compared to $14 for 2 and $9 for 1, I think. (Beyond 3, it was $6 per additional slot.) All of these plans included unlimited Watch Instantly. (There was, and still is, a cheaper but more limited plan that I’m not discussing.) Sometime last year (possibly the year before, I’ll verify), Netflix introduced a Watch Instantly without any DVDs for $8. At the same time they raised the other prices: $10 for 1, $15 for 2 and $20 for 3. These plans still included Watch Instantly as well.

This first price increase shifted the value proposition from 3 discs to 1 disc, presupposing that you considered Watch Instantly to be worth the $8. $2 extra to have 1-at-a-time unlimited DVD rental is pretty much a no-brainer, assuming you actually use it more than once or twice a month. At the time, I actually thought this was odd pricing. For years Netflix had seemed to push people toward the 3-at-a-time plan and suddenly they seemed to be pushing toward the 1-at-a-time plan. Offhand, I’d have thought $8, $12, $16 and $20 would have made more sense, or even $8, $13, $17 and $20 if they still wanted to push the 3-at-a-time plan. I wonder: What would I have done with those prices? As things went, I switched from 3-at-a-time to 1-at-a-time, saving $7 per month, which I figured more than covered going to Redbox for a few $1 rentals to fill the gap. With my suggested pricing, I think I may have switched to 2-at-a-time. I’d often felt 2-at-a-time made the most sense for us, but the pricing had always led me to the 3-at-a-time plan.

Blu-ray

A small aside to mention Netflix’s Blu-ray pricing. When they first made Blu-ray discs available, you had to pay an extra $1 per month to be able to get any, no matter how many you actually got or which plan you were on. Later, they added an additional $1 per disc slot, so $2 for 1-at-a-time and $4 for 3-at-a-time. I don’t think I’ve had Blu-ray on my plan since that change.

The last straw?

Today, Netflix announced new pricing. They key point is that they’ve decided to separate Watch Instantly entirely, though they still offer “combined” plans, though with no discount for the combination. The Watch Instantly price is staying the same: $8. The DVD plans are changing to $8 for 1-at-a-time, $12 for 2 and $16 for 3. Doesn’t seems so bad if you happen to miss the part where those DVD plans no longer include Watch Instantly. To get the same benefit as before, you have to pay $16 for 1-at-a-time with Watch Instantly, $20 for 2 and $24 for 3. If you were already on the 3-at-a-time plan, the $4 increase from $20 to $24 is steep, but not crazy. From $15 to $20 for 2-at-a-time is more severe. From $10 to $16 seems ludicrous.

Netflix correctly points out that these are the lowest unlimited DVD rental prices they’ve ever offered. Things would probably be perfectly fine if they hadn’t already trained a large number of their customers to expect Watch Instantly as a perk. In fact, if I step back and consider the options individually, I don’t think I have any problem paying $12 for 2-at-a-time rentals, nor am I bothered paying $8 for Watch Instantly. Additionally, as I observed above, the previous 1-at-a-time price was likely too low, resulting in the obscene increase at that level (300% if you consider it going from $2 to $8).

When I started this post, it was really as an excuse for the pricing research I wanted to do and a way to vent a bit. Instead, I feel like I’ve talked myself into defending Netflix’s new pricing. I’m certain they will lose customers over this change, but I think the real culprit is the previous change. If the previous prices had been my second suggestion above ($8, $13, $17 and $20, notably a fairly steep $4 increase for the 1-at-a-time plan), I don’t think the complaining at the time would have been much different. That would have resulted in the change to the current combo prices ($8, $16, $20 and $24) seeming a bit more reasonable.

I have no idea how many people switched to the 1-at-a-time plan on the previous pricing change, but certainly anybody that paid enough attention to the choices and was at all price sensitive was likely to have done so. Now, it is exactly that same group of people that are hit the hardest by the current increases.

iTunes opportunity

While Redbox offers a great alternative for renting DVDs of recent movies at arguably a better price than Netflix, I’m just as likely to get older content and new TV shows from Netflix. At present, unless this content is available online (via Netflix or otherwise), there is really no good alternative. I had hoped that iTunes would solve this problem when they started offering TV show rentals, but they just don’t seem to be offering rentals for the shows I want to watch. Even if they did, their prices are just a bit too steep unless the rentals are available much earlier than the DVDs. Or, as I mentioned in that same post, I’d be thrilled to subscribe to streaming of select channels (HBO, Showtime, TNT, etc.) as long as I didn’t have to have cable or satellite service.

Grumble. Grumble. I can already tell that I’ll very likely be changing my Netflix plan from $10 to $20. Grumble. Grumble.

Oh, I did verify the prices were as I remembered them and the last price increase was just last November! Notably, their announcement then indicated that the 1- and 2-at-a-time plans were the most popular, which might explain the changes then, but such explanations are rendered moot by the new changes.
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  1. #1 by Sybil Law on July 12, 2011 - 7:43 pm

    I’ve seen a lot of people really pissed about this, but it doesn’t shock me or surprise me in any way whatsoever. It’s a company. Still better than going to Blockbuster and hoping the movie you want is there – and then having to return it – on time.

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    • #2 by Ren on July 13, 2011 - 11:15 am

      Yes. I think even with the new prices, it’s still a good deal. I understand the frustration, and certainly there is a group of people for which the current $10 deal is just barely worth it (Dave2). I still think Watch Instantly is worth the $8, but we actually use it quite a bit — particularly the kids.

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  2. #3 by Sarah on July 12, 2011 - 7:49 pm

    I’m mad about the price increase but that’s mainly because I already extra for Bluray and now I’m paying about $18 a month for 1 at a time with streaming, or will be in Sept.

    I don’t know, there’s so much that I wouldn’t be able to watch without Netflix that I’ll probably end up keeping it but maybe I can make Vahid pay for instant watch and I’ll just pay for the DVD part.

    Yeah, that’s my answer!

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    • #4 by Ren on July 13, 2011 - 11:19 am

      Good answer! I’ll probably do something similar with “family” money versus “personal” money, though I’ll probably have “family” pay for Instant and half the 2-disc plan.

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  3. #5 by martymankins on July 12, 2011 - 11:27 pm

    Excellent write up on the Netflix pricing and plans history. I’ve been with Netflix since Nov 1999 and the first plan I remember was $20 a month for 4 out at a time. Then it went to 3 out at a time. Then I switched to 2 out for $14.99. The last few years, I’ve been at 1 out. Adding Blu-Ray was free for a while, then an additional charge, which I dropped.

    Then it was $7.99 for 1 out until they added streaming, then a $2 price increase.

    As you mentioned on Twitter, the idea that they gave for free then started charging is where I think people are getting riled up. Regardless of the value or lack of value, 60% price jump for those of us that are 1 out with streaming is hard to ignore.

    While I’m sure I’ll do my own write up on this, I’m heavily leaning towards doing a streaming only for $7.99 and then doing the Redbox for new release DVDs (which we also synced up on G+ or Twitter)

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    • #6 by Ren on July 13, 2011 - 11:22 am

      My problem with getting rid of the DVD shipment is the lack of content on Redbox and the fact that I occasionally take the DVDs on trips where I don’t know exactly when I’ll watch them.

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  4. #7 by Dave2 on July 13, 2011 - 8:50 am

    I watch one DVD a month. I stream two DVDs a month. AT MOST. So to go from $9.99 to $15.99 for “unlimited” is absurd. My only option is to downgrade to the “limited” plan with a mere two hours streaming… barely enough to get through a single movie! This whole situation is stupid. A limited plan with REASONABLE streaming options would be all it would take to keep me as a customer. As it is, I’m jumping to AppleTV and iTunes which will give me more value for the $9.99 I’m willing to spend.

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    • #8 by Ren on July 13, 2011 - 11:32 am

      Hmm… you ought to be able to do the limited DVD plan and the unlimited streaming. They’re not offering that combo, but you should be able to do it with two accounts. Does saving that $3 help or is the $3 increase still too much?

      Also, the two hour streaming limit on the limited plan isn’t the only problem — it also only streams to computers, not devices. I wonder which iOS devices counts as, since you don’t have to set them up as devices like you do other devices. Based on my understanding of how many devices you can have, iOS devices must not be included in that count.

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  5. #9 by Megan on July 13, 2011 - 9:09 am

    I’d stick with streaming only, but there are things I want to watch that aren’t available streaming. Once our current contract (we paid up a year in advance), I have no idea what I will do.

    I’m doing everything I can to try to lower my costs by cutting back the cable and adding Netflix so I have some choices when I want to watch. Doubling the price annoys the hell out of me.

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    • #10 by Ren on July 13, 2011 - 11:35 am

      It’s certainly annoying. (Though not double, right? $10 -> $16. Or were you grandfathered at a lower price?) Still a lot cheaper than cable. I really don’t think I’ll ever pay for cable again, unless there are drastic changes in the TV landscape.

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  6. #11 by Karl on July 13, 2011 - 10:24 am

    I agree with you…they should never have included the streaming for “free” with the DVD plans. Then maybe people wouldn’t be so outraged. I don’t use Netflix enough to warrant the price increase, though, so as I mentioned on Twitter last night, I’m likely canceling my account.

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    • #12 by Ren on July 13, 2011 - 11:40 am

      I cut them some slack for not really knowing how popular it would be or how well they’d be able to grow their content. Still, they should’ve offered a time-limited deal for free streaming, and then phased in the streaming price separately from the disc prices.

      I understand canceling, particularly for people that were on the $10 plan and, like Dave2, aren’t really getting enough value individually from either Watch Instantly or the DVD shipments. But for most people, I have trouble understanding that they don’t see $8 of value in one or both of those services. Watch Instantly being free for a while, and then being a great value combined with 1 disc for the last 8 months, certainly make the new pricing sting, but the prices don’t seem unreasonable.

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  7. #13 by Kevin Spencer on July 13, 2011 - 11:23 am

    We were on the DVD/stream plan and found that by the time the DVDs arrived in the mail, we didn’t really want to watch them anymore. So they’d sit there unwatched for a week or so and then I’d end up sending them back. That coupled with the fact that a lot of what we *did* want to watch wasn’t streamable meant that we bailed on Netflix a few months back.

    Oddly enough, we’d been thinking about re-joining Netflix. Until this week that is. I think we’ll be sticking with Redbox for the time being and see if Netflix rethink their pricing plan once the dust settles.

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    • #14 by Ren on July 13, 2011 - 11:47 am

      They’ve changed directions based on user reaction in the past (Profiles), so it’s possible. I suspect, however, that most people will take the changes in stride. Streaming for $8 is still better than any other option out there, and the catalog has been improving a lot. We find no shortage of stuff to watch on there. And while $8 for 1 disc at a time isn’t necessarily cheaper than Redbox (you’d have to be pretty good about watching two per week), the selection is much larger.

      One option I’ve yet to explore is the Blockbuster Kiosk that I saw somewhere. Those may have new releases sooner as they probably don’t have to do the 30 day delay that both Netflix and Redbox have agreed to.

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  8. #15 by kapgar on July 13, 2011 - 1:13 pm

    I plan to discuss this in today’s Snippet Wednesday and I’ll link here for more detail. I plan to drop from 3 DVDs to 2 as a result of this price change.

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    • #16 by Ren on July 13, 2011 - 3:10 pm

      2 does seem to be the sweet spot now, though if you want or need the volume of 3, it’s arguably slightly better — same increment, but better average. After 3 the increment increases.

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  9. #17 by kilax on July 13, 2011 - 5:32 pm

    I was really confused by the changes when I first saw them. For some reason I thought it just cost more to have both movies and streaming unlimited (or something). Either way, I wish they would offer a discount for streaming if you are paying for disks, or at least offer more content on streaming.

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    • #18 by Ren on July 13, 2011 - 5:43 pm

      Yes, a discount for both would be a good idea. In fact, the lack of said discount makes me think they may be planning to sell off their DVD business. That would explain a lot!

      BTW, did you see my Tweet about being in Chicago this Sunday?

      Like

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