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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Netflix WatchTiVo Crash Instantly

Ever since I switched back to Netflix and started using the Watch Instantly feature on my TiVo, the TiVo has been noticeably less stable. The problems didn’t manifest right away; rather, it wasn’t until my kids and I had a chance to get addicted to the service that issues started to crop up.

At first, it was just that the Netflix functionality would stop working and I would have to reboot to fix it. Soon after, however, I also started experiencing occasional spontaneous TiVo reboots or other problems that led me to manually rebooting it. Additionally, reboots started to become less reliable — that is, the system would appear to not finish booting and I would unplug it to give it another go. Sometimes I would have to unplug it two or three times before it finally booted correctly.

A bit of Google investigation revealed that others have been having trouble since enabling the Netflix functionality, and that some have even been unable to get the system to boot at all. Luckily, I haven’t run into that show-stopper yet, but I’m certainly hesitant to use the Netflix feature now (on the TiVo, that is — works fine on my Mac).

On Wednesday evening, I turned on the TV to find the TiVo rebooting. Forty minutes and two or three additional reboots later and I finally had it up and running again ten minutes after prime time started. Luckily, the ten minutes missed of the two recordings didn’t really matter as they weren’t real shows (American Idol Auditions and Lost recap), so no big loss.

I’m not sure I’ll be using the Netflix Watch Instantly service on my TiVo again any time soon.

And now back to Netflix…

In the continuing saga of by-mail DVD rentals, I have once again switched from Blockbuster Online to Netflix. The draw this time was the availability of Netfilx’s Watch Instantly feature on my TiVo HD. I must say, this is very cool, but more on that later — first, a little history.

I started with Blockbuster Online back at the beginning of 2005, switched to Netflix for their Profiles feature (and anticipation of better selection and turn-around times), switched back to Blockbuster Online for their unlimited in-store exchanges and once-a-month free video game (or movie) in-store rental. By my reckoning, I was with Blockbuster Online for about five months, then Netflix for about 19 months, then BBO again for two years.

While I really do like the Watch Instantly feature, the selection isn’t great. Additionally, I decided to downgrade my DVD shipments from three-at-a-time to one-at-a-time ($9/month instead of $17/month), which makes the Netflix Profiles less useful. On the other hand, it leaves $8-$10 (BBO was $19/month) available for those $1/night kiosk DVD rentals. I’ve also given up the free video game rental, but I was hardly ever using that, so I don’t miss it.

What I’ve really given up is the unlimited in-store exchanges with BBO, as I was grandfathered into this at my price point and I believe that you now have to pay something like $35 (versus the $19 plan I was on) to get unlimited; otherwise, you get like three per month. If the Watch Instantly selection improves over time, then I don’t think this will be a problem. Already, the kids like it because there are a number of Disney shows that they like to watch that are available (and we don’t have cable, so no Disney). Plus, being able to Watch Instantly from my MacBook Pro when traveling (assuming sufficient bandwidth) should be a nice bonus. I wonder if it works internationally?

Blockbuster Online

I’ve been using Blockbuster Online for most of this year and I thought I’d record some comments about it. First, the deal was pretty enticing: $14.99 (+ tax) per month for unlimited three-at-a-time DVD rentals by mail, plus two in-store rentals per month. Honestly, it was the two in-store rentals per month that sealed the deal for me to choose Blockbuster over Netflix (which was also slightly more expensive).

I’ve never actually used Netflix, so I cannot make a direct comparison of the two services. However, word-of-mouth leads me to believe that the two biggest differences are DVD availability and turn-around-time. For the first, I’ve really had very few problems with availability, though I’m often not particularly picky about which DVD I get, so I may simply not notice the problem. The DVDs in “My Queue” are often listed as “Short Wait” or even “Long Wait” instead of “Available Now”, but I see these change pretty often and I’ve even been shipped a DVD on a day when I had seen it marked as “Short Wait”. The only time I really had much of a problem with it at all was when I had the first DVD of the first season of The Wire at the top of my list. It took quite a while for it to actually ship (and even caused me a secondary problem when it actually did ship because I was expecting one of the other DVDs to ship instead).

Regarding turn-around-time, the key issue is the location of the nearest distribution center. For me, in Austin, the nearest Blockbuster distribution center is in Houston. Netflix has apparently had a distribution center in Austin for a while now. This makes a big difference in turn-around-time — four days versus two days. This will probably be improved at some point, either by Blockbuster opening a distribution center in Austin or by some sort of use of their stores for this purpose (which the mention is in the works in their FAQ). While the longer turn-around-time does lower the maximum number of DVDs you can get per month, this is not a huge issue for me as I would not likely watch the DVDs that quickly. Still, there are certainly times when getting the next DVD sooner would be very convenient.

An issue that, for me, has the potential to be bigger than the actual turn-around-time is the apparent technical delay that Blockbuster is periodically having in updating my queue with information about DVDs being received and shipped. So far, this has only been an informational issue and thus just an annoyance, but it certainly isn’t comforting. When combined with the difficulties I have in managing my queue (see below), this can be particularly irksome. The worst example I’ve seen so far is when I put a DVD in the mail on a Tuesday, received confirmation that it had been received on Thursday but did not receive confirmation that the next DVD had shipped until Saturday. I generally try to get a family movie in time for the weekend, so in this particular case I had arranged my queue on Thursday to facilitate this. But on Friday, after not having received a confirmation of a DVD having been shipped on Thursday, I modified my queue (since receiving a family movie on Monday is not very useful to me). When I finally received the shipment confirmation on Saturday, to my dismay it indicated that one of the family movies had shipped. Since my queue no longer had any family movies near the top, I held out hope that the DVD had really shipped on Thursday and it was only the confirmation email that was late (along with the “Shipped Movies” list being updated late on the web site). Luckily, that afternoon (Saturday) I did receive the family movie, so it clearly had shipped on Thursday after all.

The problem I have with managing my queue that I mentioned above is basically that it is very difficult to control what *type* of movie you will receive next. You cannot control exactly what movie because of availability, and this is an expected and acceptable consequence of the business model. But it is still very desirable to control the type of movie. As in my example above, I like to receive a family movie for the weekend, but not at other times. Similarly, there are times when I would like to receive a movie that my wife would want to watch and other times when I know she is unlikely to watch a movie. As things work now, I have to make wholesale changes to my queue in preparation for the next DVD to ship — moving a whole bunch of family movies to the top at some times, and moving them to the bottom at other times. (Moving only a few makes it too likely that all of them might be unavailable and something else would ship instead.) This is particularly complicated when it is expected that two DVDs will be shipped on the same day. I do not want two family movies. There’s pretty much no way to handle this situation other than to trust the availability and hope to get lucky. This actually just happened to me for this weekend, and one way or another I did get lucky enough to get exactly one family movie shipped.

The solution to this problem that seems the most direct to me is to simply have a separate queue for each of the three “slots”. There are obviously some user interface complexity issue with this, so it would probably need to be an advanced configuration. Also, having totally separate queues isn’t actually a complete solution for various reasons. Still, it would be a start. A better solution might be to allow the user to put DVDs into categories and then to place a category at a spot in the queue. The queue would still have individual DVDs as well. This would fix the problem in two ways — first, it would make it much easier to rearrange groups of DVDs, and second, it would make it possible to have only one DVD from a category shipped even when multiple DVDs were being shipped. That is, if I put the “Family” category in the top slot, a family movie would be shipped (as long as one was available) but then the category would be removed from the slot and one of the DVDs below it in the queue would be shipped as the second DVD. Of course, you could also put the “Family” category in the first two slots to get two family movies shipped.

All-in-all, I’m pretty happy with the service, and I certainly feel like I’m getting a good value. I am somewhat tempted by the in-store one-at-a-time unlimited rental that Blockbuster now offers for the same price, but I think that the reduced selection in the stores is enough reason to stay with the online version.