Tuesday, October 25, 2011

Why I'm Not Abandoning Netflix

I read an article this morning in the Denver Post about how the shares of Netflix - the DVD-by-mail and online streaming movie subscription service - have dropped over 35% recently. This is as a result of a loss of around 800,000 subscribers and some questionable business decisions over the last year. People are upset over the recent price hike - in some cases, as much as 60% - and I know many people who are frustrated by the number of movies and television programs that "expire" from streaming availability. The whole "Qwikster"idea - in which the DVD by mail service was to become a separate entity - made me angry, as did the elimination of the "saved" portion of the streaming queue, and I let them know about it by e-mail and by phone many times.
However, I am not among the 800,000 who gave up on the service recently, nor will I likely be among those who are still projected to leave the service in the coming months.

Here's why:

1. The price increase was inevitable.
Corey Feldman movie marathon: complete.
I have always felt that I was getting a great deal from Netflix - even before they started the streaming service. And by "great deal," I meant that I was robbing them blind. I can easily watch twenty movies in a month. Even for those months where I was busy, and I ended up holding on to my movies for several weeks (as many people do), I would more than make up for it over the next few months. Streaming made it even easier to watch more movies. A movie from a Blockbuster store could cost between 99 cents and 3 bucks, and, if you didn't return it right away, quite a bit more. Redbox movies are a buck, but are also subject to the automatic late fees. And let's face it, there's nowhere near the selection through either of those services. Netflix pays the big movie studios (directly or indirectly) for the right to rent DVDs and even more to make them available for streaming. As the number of subscribers increased and the library expanded, the cost of keeping that many movies under a rental license increased. The smarter move might have been to make the increases more gradual, but - in the end - it's still a pretty good deal.
For example, I have the 3-at-a-time subscription with unlimited streaming. That costs about 24 dollars per month. 24 dollars would get me somewhere between 8 and 24 rentals from a Blockbuster store, but I have to go get the movies and take them back right away. The Redbox and Blockbuster rental kiosks are a little more convenient, but there's still the late fees and the running back and forth. I can easily watch 24 programs in a month from Netflix, and I don't have to go any further than my mailbox. Now, I'm a serious movie buff who happens to have a lot of spare time these days, so I probably watch quite a bit more than most, but there are other Netflix packages that are geared for more casual watchers and priced accordingly.

2. Netflix isn't who's taking your movies off of streaming.
"Another Hilary Swank DVD for Brady Darnell?
Geez. Obsess much?"
Running a DVD by mail service is expensive. You have to have warehouses to store the DVDs. You have to hire employees to receive, sort, and mail the DVDs. You have to pay the postage. Oh yeah, you also have to buy the DVDs (in addition to the rental licensing contract.) If DVDs get lost or damaged in the mail - and it happens quite a bit - you have to absorb that cost. Believe me, if Netflix could have every title in their catalog available for streaming, they would. It would cut their overhead significantly, even offset by the increased bandwidth and licensing costs.
Just be patient.
They'll get theirs.
It's the licensing companies that say "yea" or "nay" on streaming and put end dates on the amount of time that their products can be available to stream. They even set limits upon how many times they can be viewed, which often fast-forwards their removal from the streaming catalog. These licensing companies are afraid that fewer people will buy their DVDs if the programs are too easily available online. (And they're probably right.) Netflix would rather that Dexter hadn't gone off of streaming, too. It wasn't their call. And I'll bet you they're working on negotiations to get it back, but it's probably going to end up costing them more money to do so.

3. Netflix appears to be learning from their mistakes.The fact that Netflix abandoned the idea of Qwikster just a few weeks after announcing the plan publicly may look like bad business planning (and it probably was), but it was also in response to many subscribers - including myself - yelling out a collective "WTF?" Now, to Wall Street, Netflix looks like it doesn't know what it's doing. To me, a company that's willing to swallow its pride in the interest of its customers can't be all bad.
I wouldn't expect a reversal on the price increase, though. See Item #1.

4. The alternatives still kind of suck.
Redbox and Blockbuster kiosks have late fees and fewer selections. Also, I once got a DVD out of a Redbox kiosk that was covered in grape jelly. (At least I hope it was grape jelly.) Blockbuster stores - the few that still exist - also have limited selection of anything but new releases, and there's still those pesky late fees. Hulu free is a great deal. Hulu Plus is also a pretty good deal, but the selection just isn't comparable. I've been trying out Blockbuster By Mail for a little while now. It's just a little more expensive and does not have an unlimited streaming option, but the selection is at least comparable to Netflix. They even have some new releases a couple of weeks before Netflix. The best feature is that with the 3-at-a-time option you get unlimited in-store exchanges. I live near one of the remaining Blockbuster stores in Denver, so that's convenient for me, and it makes up for how painfully slow (in comparison to Netflix) Blockbuster's by-mail program is. However, if I didn't live near a store, it wouldn't really be worth it.

So, why am I coming to Netflix's defense? They certainly aren't compensating me. I'll prove it. I think Netflix CEO Reed Hastings is a bit of a tool. I think Netflix still has a long way to go in terms of customer service and quality control. I just sent back a DVD that was too scratched to watch, and they still have the second season of the BBC sci-fi comedy Hyperdrive uploaded in the wrong order despite multiple complaints from users. Also, I want the "Saved" portion of the streaming queue back.
However, I still think that they're the best game in town . . . in the country . . . online . . . whatever, and I recognize that if they lose too many more subscribers, it's going to be very difficult for them to stay in business, much less continue to expand and improve the service. And don't get me wrong, my loyalty is just as fleeting: if a better alternative comes along, I'm there. That's why I took Blockbuster By Mail for a test drive. However, that superior competitor is only going to appear if Netflix is a viable model to copy (and I think it is), not if they are circling the drain.
I'm just thinking ahead here.
Hey, maybe Netflix should hire me. That's a skill that they have been pretty short on this last year.

By the way, this is streaming on Netflix right now:

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