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Netflix Lowers Outlook, Citing Disgruntled Customers

7 points by px 15y ago

gamble 15y ago
Netflix needs to figure out how to announce fee hikes without provoking outrage. If they intend to become a serious replacement for cable or satellite subscriptions, they will need to bring in a comparable amount of revenue. That means Netflix's fees will have to go up dramatically over the next few years.
- lsc 15y ago
  I'm not sure it was how they announced the hike so much as the customer's expectations as to what direction prices go in that industry. Customers expect computer services to get cheaper all the time. I mean, you can buy twice the computer for the same money as you could two years ago, right? Bandwidth follows a similar (though not quite as steep) curve, so the visible costs for providing such a service are falling. You raise your prices by lowering them slower than the costs of your inputs fall. Of course, I have no idea how much licencing the content costs, that may be a rising cost with more content being streamed, but I don't think that's a particularly visible cost. My belief is that the outrage over Netflix's price hike mostly has to do with the fact that most people think of netflix as a computer service... something that should get dramatically better and cheaper over time. I mean, I think that cable companies can raise prices mostly because in the past, there wasn't much alternative for on-demand at-home viewing. You'd have to drag your ass down to the video store, and really, if I felt up to leaving the house and getting something done, why would I watch TV anyhow? This has set something of an expectation that cable prices will go up over time. Netflix is starting in an arena where that expectation is not set, and they are not a monopoly player. Because of this, if netflix wants to raise prices, they need to show dramatically better value. Netflix is in a position to turn the cable companies in to mere ISPs, sure, but I very much doubt that they will ever be able to charge as much as the cable companies. Personally, I suspect the mistake netflix made was that they thought they'd let people have streaming for free while they were working out the kinks and signing on content providers, probably planning all along to charge money once it was worth charging for. A fine plan, but they failed to set customer expectations in this regard, so everyone is up in arms.
- jamesteow 15y ago
  How does one announce price hikes without provoking outrage?
  - gamble 15y ago
    Couple the hikes with announcements of new streaming content? No one will be happy with a fee hike, but they should perceive that it's going to improve the service rather than a cash grab to bump Netflix's stock.

7 points by px 15y ago

Netflix needs to figure out how to announce fee hikes without provoking outrage. If they intend to become a serious replacement for cable or satellite subscriptions, they will need to bring in a comparable amount of revenue. That means Netflix's fees will have to go up dramatically over the next few years.

lsc 15y ago
I'm not sure it was how they announced the hike so much as the customer's expectations as to what direction prices go in that industry. Customers expect computer services to get cheaper all the time. I mean, you can buy twice the computer for the same money as you could two years ago, right? Bandwidth follows a similar (though not quite as steep) curve, so the visible costs for providing such a service are falling. You raise your prices by lowering them slower than the costs of your inputs fall. Of course, I have no idea how much licencing the content costs, that may be a rising cost with more content being streamed, but I don't think that's a particularly visible cost. My belief is that the outrage over Netflix's price hike mostly has to do with the fact that most people think of netflix as a computer service... something that should get dramatically better and cheaper over time. I mean, I think that cable companies can raise prices mostly because in the past, there wasn't much alternative for on-demand at-home viewing. You'd have to drag your ass down to the video store, and really, if I felt up to leaving the house and getting something done, why would I watch TV anyhow? This has set something of an expectation that cable prices will go up over time. Netflix is starting in an arena where that expectation is not set, and they are not a monopoly player. Because of this, if netflix wants to raise prices, they need to show dramatically better value. Netflix is in a position to turn the cable companies in to mere ISPs, sure, but I very much doubt that they will ever be able to charge as much as the cable companies. Personally, I suspect the mistake netflix made was that they thought they'd let people have streaming for free while they were working out the kinks and signing on content providers, probably planning all along to charge money once it was worth charging for. A fine plan, but they failed to set customer expectations in this regard, so everyone is up in arms.
jamesteow 15y ago
How does one announce price hikes without provoking outrage?
- gamble 15y ago
  Couple the hikes with announcements of new streaming content? No one will be happy with a fee hike, but they should perceive that it's going to improve the service rather than a cash grab to bump Netflix's stock.