Netflix's Blu-ray pricing: A boon for Blockbuster?
Somewhere, someone is smiling at Blockbuster headquarters.
When Netflix announced on Monday that it has decided to raise the subscription prices for those receiving Blu-ray Disc titles--10 percent of its subscribers, according to the company--the predictable occurred: people lashed out, saying Netflix is gouging customers.
In case you missed it, the new fee structure tacks on $1 per tier of the plan you're on. So if you have a one-film-at-a-time plan (two-movie allowance per month), your monthly cost has risen from $4.99 to $5.99. If you want three films at a time (unlimited movie allowance per month), your cost has risen $4, from $16.99 to $20.99. Fees are up substantially on other plans too.
Predictably, many looked at the announcement as Netflix capitalizing on consumers. Those who are upset with the release say the increase is too high. And since Netflix doesn't need to pay for packaging, and it probably gets a discount on media, given the number of copies it needs, they believe that the company is gouging customers.
I contacted Netflix for comment regarding this contention. A representative responded to me within a few minutes. He said the cost of Blu-ray discs is 30 percent higher than that of DVDs, and more of the company's customers are switching to Blu-ray, generating higher operating expenses. A $1 additional charge for Blu-ray access on all plans wasn't cutting it any longer, he said.
The representative then directed me to the company's official blog post on the matter for more information. So after all that, we still don't know how much Netflix pays.
But regardless of the motives behind this deal or the fact that some people are upset, we can't look at Netflix pricing in a vacuum. Quite the contrary, we need to compare its pricing to the competition to determine if it's still the most affordable option on the market.
Much to my surprise, Netflix might have committed an incredible blunder that it needs to address immediately: Blockbuster brick-and-mortar stores now have the more affordable option for standard Blu-ray rentals.
If we look at Netflix pricing and compare it to pricing at local Blockbusters (I called three stores to confirm Blu-ray prices), it quickly becomes clear that, assuming that you're renting high-definition films, Blockbuster is more affordable.
Let's say that you own a PlayStation 3 and want to rent Blu-ray films. But instead of renting 10 films per month, you want only the occasional movie, so you rent about one film per month. If you want that movie in Blu-ray format, it will cost you $4.99 at Blockbuster. But if you rent a Blu-ray movie on Netflix, you'll pay a flat monthly fee of $5.99.
But let's say you're a movie buff, and you want to rent three films during a month. Those three films at Blockbuster will cost you $15 before tax. On Netflix, you'll pay a fee of $20.99 before tax for a three-film plan. You'd have to replace two of the three films over the course of the month to beat the Blockbuster deal.
But it gets better. If you want the top-tier Netflix deal, eight films at a time with Blu-ray access, you'll be forced to pay $56.99 now. Assuming that you rent (just) eight films during a month on Blu-ray from Blockbuster, and return them on time, you'll be paying $40. And that doesn't take into account the fact that some of the films you might receive from Netflix will be regular DVDs, which are even cheaper at Blockbuster brick-and-mortar stores.
It's true that after subscribers start sending films back, they will save money with Netflix. The Blockbuster prices also don't account for late fees and the cost of gasoline used, as well as general inconveniences oriented with heading to a video rental store (i.e. not always finding what you're looking for). Netflix eliminates annoying shoppers and empty shelves, offering predictability and convenience. But if you're someone who wants to grab films at the local store without waiting for the mail, and you'll watch about one movie per weekend, Blockbuster may turn out to be a much better deal.
Blockbuster's by-mail service, TotalAccess, is now cheaper too. If you want three films (potentially in Blu-ray format) at the same time and no limit on the number of films you can rent during the month, Blockbuster's plan is $19.99. Netflix's comparable plan is $20.99, with Blu-ray availability.
TotalAccess is just as convenient as Netflix's service. You get your films delivered to your home, you don't have late fees, you won't need to pay for the cost of gas, and the films will always be available. In other words, TotalAccess provides all the same benefits as Netflix's offering for a lower price.
OK, so maybe you can make the case that Netflix plans include streaming. But Blockbuster plans include in-store exchanges, and the company's streaming plan calls for $4 per rental. Once again, if you rent just a few movies per month, it's cheaper to use Blockbuster's streaming service than Netflix's.
Am I the only one who is vexed by Netflix's new Blu-ray pricing scheme? The $1 surcharge for Blu-ray was understandable. But once Netflix started charging this much more for its plans, it turned into a mistake, in my estimation. The company just handed over price leadership (among its more run-of-the-mill users, at least) to its main competitor for no good reason. What gives?
Netflix is now the most affordable option if a) you return films to Netflix throughout a month or b) if you return films to Blockbuster late. Are those situations normal? Sure. But given the current economic conditions and the fact that we're all trying to save some cash where possible, how long will it take before subscribers realize that they can potentially save money by going to Blockbuster to pick up that movie or by subscribing to TotalAccess?
I never thought I'd say this again, but the brick-and-mortar option (from Blockbuster, no less) just trumped the by-mail rental business for me.
Am I the only one who thinks that's ironic?
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Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
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If you want to rent 3 Blu-Ray Movies from Netflix in a month, you only need the $8.99 1 at a time, unlimited plan ($10.99 with Blu-Ray). That saves you $4.00 over Blockbuster in-store. AND, you don't have to drive back and forth to the store. Saving you time and gas.
We have finally landed on $21.99, 3 in mail at a time, 1 free in store rental a month, and if you return your in mail movies to the store to get a free rental, they won't ship the next in mail DVDs until you have returned the in store DVD.
And be sure to click the "See all available plans" link in the lower right.
So what you are saying is, if you rent one movie a month, you should not get a subscription based service?
Clearly, Netflix is wayy more expensive than Blockbuster!
Thanks Sherlock!
The only thing that irks me about this backdoor price increase is Netflix has said in formal finical statements that they are making money on physical discs, both DVD and Blu-ray. Yet, they are loosing money on streaming. Why not leave the Blu-ray customers alone and charge $1.00 or $2.00 a month for streaming?
A three at a time, unlimited Netflix plan will EASILY get you to WAY more than 8 movies a month. That makes Netlfix almost 50% cheaper (even with Blu Ray) than Blockbuster.
I am shocked at how poorly educated some of the writers in cnet tend to be. Are these the guys who could not get jobs at 'actual' tech companies?
It's impossible to serve all the people all the time. It sounds like Netflix still owns the price advantage for non Blu-Ray users. You argue they are loosing out among their more "run of the mill" users. I would argue their more run of the mill users are probably still on DVD. I wouldn't pay a cent more for Blu-Ray and I know plenty of people who feel the same way I do.
I've been considering switching to block buster for a while, this seems like as good a time as any. I hope the transition goes smoothly.
I stayed with Netflix but I did drop the Bluray access because it just doesn't matter that much. I don't like how Netflix went about raising rates but I loath Blockbuster. Blockbuster is the AIG of the video rental business. Big and greedy and willing to scam you at every chance. This has not changed for Blockbuster and they will level late charges on you if they get the chance. Blockbuster charges huge late fees on it's Total Access plan if you are late on the in-store trade.
How free in-store movie exchanges work with Online Rentals: Previously, free movie in-store exchange rentals were in addition to the number of DVDs allowed out at-a-time under your Total Access membership plan. However, beginning in February 2009 (in some store locations) and over the course of the next few months (in the remaining corporate and participating franchise stores), this policy will change in two ways. First, all free movie in-store exchange rentals will count towards the number of DVDs you are allowed out under your Total Access plan at any one time. Second, your free in-store exchanges will have no due dates and will not be subject to in-store rental terms. You may keep your free in-store movie exchanges as long as you want, as long as you are a paying Total Access subscriber. If you cancel your Total Access subscription, your free in-store rentals are due back to the store within five (5) days, to avoid any additional in-store fees, if applicable.
I dont know if Blockbuster allows you to do that. I use that option a lot, it is better than Hulu, because there are zero commercials. That is the only benefit of Netflix at this point. Plus, they never stream NEW movies.
The Idea that I pay 3 times as much to rent 2 movies on Blu Ray at a time as I did previously is disgraceful. Lets assume they do pay 30% more for blu ray movies, which I think is an exaggeration, 30% is still not the 33% that became my increase. So in effect they are taking MORE advantage of its subscribers. If Blu Ray ever hopes to be the standard for watching media, this effort of greed, along with the cost of buying Blu ray players and movies must truly take steep decline in costs. Yes I know, I have mastered the obvious.
When I first started, I was getting most of the newest Blu-Ray releases in timely manner. After my second month, however, I stopped receiving new releases for at least a month and a half. The only movies I got were ones that were not wanted by others. In the last few months of my subscription I wasn't receiving ANY new releases at all. Virtually everything in my queue had a "long wait" or "very long wait."
In the mean time, a friend of my decided to setup his own Netflix account under the free trial. All of the movies that were "long wait" in my queue were either "available" or "short wait" in his queue. Many times, I would watch a movie in my queue go from "long wait" to "available" and right back to "very long wait" without getting the movie. Keep in mind, these were movies that I kept at the top of my queue for months.
Paying more for Blu-Ray when they don't even care about existing customers, we are paying for nothing!
I canceled my subscription about a month and a half ago (before this announcement) because I stopped getting new releases altogether. Sadly, I was considering returning (as a new customer so I could "play" their game and get new releases) but after hearing this news it's off to Blockbuster for me.
Netflix, you are digging yourself in a huge hole here and driving your business to other companies.
On another note, I was unable to find a method to leave "virtual" feedback on the Netflix site. At best, I only found a number for their customer service. Personally, I would rather email someone so I can have clear documentation of our conversation.
I guess they are not interesting in feedback from their customers. Guess they really don't care about any customers after 2 months.
This is an apples to oranges argument. The comparable plan from Blockbuster is actually just $15.99 per month. If you go to their website, you need to click on the "See all plans" link in the lower right to view their "By mail" plans.
The Blockbuster price you've quoted is actually for a Total Access plan which grants you five FREE in-store movie exchanges and discounted game rentals. Please make the necessary changes to your article.
Thanks!
I don't think Netflix is going to lose business just because of the $1 increase. Granted some will switch to BB but the rest are going to stay. DVD still trumps Blu-ray in terms of sales. The true impact will be in the next decade when we'll have enough people with HDTV & blu-ray to do the comparison.
I have been with Netflix since 2001 and feel stabbed in the back with this increase. I swore to never go back to Blockbuster because they treated thier customers badly - now Netflix is doing the same. Maybe it is time to go back to Blockbuster.
- by danno321s April 1, 2009 10:15 AM PDT
- So far out of 20 movies I rented from Netflix, only 1 came in Blu-Ray format. I don't rent films by format. I am going back to the DVD-only plan.
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