Lessons Learned from the Netflix Price Hike

Last week Netflix raised their rates, increasing the price of some plans by as much as sixty percent. Where before a plan with one DVD out at a time and unlimited streaming was $9.99 per month, the same service will now cost $15.98. Ouch. The outrage online was swift and furious. Customers were losing a great deal and weren’t shy about bashing Netflix on Facebook and blogs. As someone who uses Netflix heavily as a replacement for cable, I was among the outraged. (I’m still deciding what to do with my subscription: scale back, keep it as is, or cancel altogether.) Once I got over my shock I realized that Netflix’s action has reminded me of a few key financial/consumer lessons that apply to all kinds of goods and services.

A price increase might not break the budget, but it does have to be considered: No, an extra $6 per month isn’t going to break my budget. I can afford it, but it doesn’t mean that I like it. And it doesn’t mean that I’m going to pay it. When something that isn’t strictly necessary goes up in price, I have to evaluate whether or not it’s still worth it. Do I get enough value out of the service to justify the increase in price? In the case of large price increases, can I trim another area of my budget to cover the new cost? Do I want to do that or is the other choice more important/valuable to me?

Most of us have a finite amount of discretionary money. When something goes up in price, choices have to be made about what to keep, what to cut, and where the extra money will come from. In the case of Netflix, while $6 isn’t a huge amount it does become problematic when added to the recent price increases I’ve seen for many other things I use. Eventually something has to give and the budget has to be remade. Netflix is still a good deal compared to cable for me, but at the new price I have to ask myself if I use it enough to justify it or if I should drop down to a cheaper alternative. While it might not break me to keep things as is, a price increase requires evaluation.

Always push back: I’ve enjoyed reading a lot of the comments posted on Netflix’s Facebook wall and blog. While some have just been foul mouthed rants, many have been carefully considered arguments against the increase, eloquently expressed disappointment, and well-considered suggested compromises. People are exercising their right to push back at the company rather than just take poor treatment.

As a consumer, you have the right to complain and to take your business elsewhere if you no longer care for the way a company does business. Whether it’s Netflix, a phone company, a clothes manufacturer, or a grocer, you have the right to express frustration and dissatisfaction. It might not make a difference every time (as of this writing Netflix hasn’t changed it’s mind about the price increase), but it does let companies know when they’ve done something wrong or upsetting. The only way some companies are ever going to know how their actions affect customers is when those customers tell them. So speak up if you’re dissatisfied with a company, but remember that the most successful complaints are often the most polite.

Find alternatives: It’s my job to find alternatives when a price increase derails my budget. I can either find a less expensive alternative service that’s close to what I had (in this case I’m looking at Redbox, Hulu, and Amazon’s streaming service), or I can find something new altogether. As consumer’s we’re free to vote with our wallets and to give our money to the company that provides the best bang for the buck. If that’s Netflix, great, but if it’s someone else it’s your job to find that out and make the switch. Don’t just blindly pay the increase without looking at other options. This goes for every good and service you buy. It’s a big marketplace and there are lots of companies that want your money and are willing to compete for it.

In the wake of Netflix’s increase, I’m realizing that I was spending too much time watching TV. This was part of why I got rid of cable, but slowly I’ve given more of my time to DVD’s and streaming. If I cancel Netflix and use Redbox, it will be a good way for me to control my watching since I’ll have to drive to a store to get a movie. This is a good chance for me to get back to my reading and other hobbies. So, in a way, the increase is a positive for me. It may force me not only to consider alternatives for TV viewing, it may force me to consider alternate activities, as well.

I can afford this price increase without tearing my budget apart, but I’m reminded that it always makes good financial sense to consider all of the alternatives and evaluate that value of any service. Some people I know are opting to keep Netflix, but are trimming their cable expenses or dining out budgets to cover the increased cost. Others are trimming their Netflix plans back to keep the cost close to what it was. To them, Netflix is worth the adjustment. In my case, Netflix likely isn’t worth the price anymore. There are other choices and other things I’d rather do with my time. In either case, we are acting as informed and conscientious consumers instead of blindly paying increases on discretionary items. That’s a big part of successful budgeting.

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16 Responses to Lessons Learned from the Netflix Price Hike

  1. Benjamin says:

    I believe companies can do a much better job of introducing price hikes to products and services “out of the blue” such as the way Netflix has done.

    Naturally, these price increases almost always boil down to increaing the value of the corporation for the shareholders but in some cases, such as with Netflix, customers need to realize that in order to continue the great service that Netflix provides (online streaming and videos by mail) they must remain a financially viable company as well.

  2. So many people are fed up with Netflix since the crazy price hike. I’ve canceled my service and just use Blockbuster and TVDevo for streaming TV and Movies.

  3. Christine says:

    I agree — what has Netflix ever done that’s right?


  4. AR says:

    I agree with the first comment. They could have done a much better job of introducing a price hike. If they had sent us an email and essentially said look, Sony wants to charge us an arm and a leg for content, and all the big wigs in the studios are demanding more money…so we need to charge more for the service, we all could have understood, and for the most part directed our anger at the studios, not Netflix. But in every quote you read in the news, Netflix higher ups sound very cold about the price increase. They simply display an attitude of not caring, and that is a further slap in the face to the customers who have been loyal to them, besides the 60% increase. Even if it means having to go to more places to get my content, I am leaving Netflix as a form of protest. The loss of my $10 a month may not break them, but I will never recommend them again, and that can lead to a long chain of customers that they will not get.

  5. Juan Ceballos says:

    I just don’t get all the crying. Wow $16 a month. I just bought a Roku for the sole purpose of streaming Netflix. I can buy one DVD a month or I can rent from redbox half of the month. I canned cable for being 65 a month. Most people can pay the 16 just by not eating out twice a month. Ill keep paying 8,99 a month or whatever loose change Netflix charges to see all those movies in 1080p with 5.1 surround on my roku.

  6. Jenna says:

    I almost want to end my membership to shove it to them…but mostly because the price hike was unnecessary and there are other options available. Redbox can be found in many places and is really efficient. Netflix obviously doesn’t care about it’s customers(they chose not to assist the hearing impaired in being able to watch captioned movies) and now they raise prices significantly. I’ll take my business elsewhere!

  7. ric austin says:

    netflix, i spent 40 mins telling you all the reasons yo should take care of your current customers better.(for whatever reason, it didnt post…) literaly, worship the folks who built you a company. im not gonna type it all out again, but for real? 60%? that means u gotta lose 60%(oh wait- more than that… you think we like you that much?!?!?!) of your customers to post a loss. shareholders will be happy. not just with you, but with all of your competitors. i urge people to switch. i love netflixx, and work in a job where i spread the word. people, spread the word about alternatives. 10%? ok. 20 %…? ummm ok still…60%… someone said amazon has a thing….? if 60% drop netflixx, i bet alternatives pop up all over… just sayin. speak with your wallet… its summer, drop flixx, and see whats available come the cold months when we r back indoors. for real, maybe its a sign we watch too much tv.. ask me again in the fall when i am embracing the cheaper alternative…!

  8. Bryan says:

    I’ve been a Netflix customer for some time now and I preached the good word to so many people about it. Well this is the last straw with this company as they obviously do not care about their customers and treat them very poorly. There are a lot of other options out there, and honestly, their instant streaming service library is a DISGRACE! We live in a society of capitalism, tell Netflix how you feel by not paying this greedy company any more money!!

  9. William says:

    I must agree with Jennifer Derrick on this. While the increase will not (break the bank)with me, I do find I have begun spending more time watching programs on Netflix than I should. Being a writer this is not good since it shifts my attention away from my writing. However, I do enjoy a good movie now and again especially with well thought out FX. On August 4th I will be cancelling my subscription to Netflix. As of late I have enjoyed going to the Theater with my son or daughter. I forgot how nice the big screen was.

  10. Ethan says:

    I had thought that Netflix was a great deal for our movie watching amount. We normally are able to watch a couple or at most three DVD’s a month. With a three year old in our home she tends to watch many of the live streaming kids videos. Not sure if we are going to continue on with our plan though. I’m trying to add more to my savings account each month not take from it. That’s why I originally cut back the cable because of their price hikes.

  11. Thippi says:

    Well said Jennifer Derrick 🙂 I was shocked and very frustrated to see a 60% increase and wished Netflix would have explained a little more why they’ve increased their prices. If they would have said it basically the way the commenter 4-AR wrote, I would have been more inclined to stay & choose elsewhere to save some money. But I chose to cancel due to how they treat their costumers. I can go elsewhere to get my TV time like Hulu & Redbox.

  12. jon29 says:

    If you look around, you can still get deals on Netflix.

  13. Gail says:

    And some of us use rabbit ears and can actually pick up several TV channels and have built up an impressive library of videos and DVDs on the cheap and so have no need of Netflix and have never used it.

  14. Gail says:

    As an addendum: one of the things to always consider when you sign up for anything that you voluntary spend money on each month is that the price will ALWAYS go up eventually and so right from the get go you need to carefully consider how much you can afford to pay for these extras on a monthly basis and I always found that it seems they all raise their prices around the same time. You might keep paying the increase and find after a few years what started out as a $25-30 a month expense is now running $100 a month and you haven’t had a raise or enough of a raise in the same amount of time to keep up with the expense but now you are hooked.

  15. Nova says:

    I was only using the streaming with netflix so it didn’t affect me. I’ve heard people talking about going with redbox. Two weeks ago I would have raved about redbox, but not now. Not once, but twice in the last week I reserved DVDs online thru Redbox. Both times I went to go pick them up, something was wrong with the redbox and I couldn’t get my DVDs. So, I had to call customer service and wait several minutes so I could reverse the charges. I might not ever use them again. It almost seems like there are less and less affordable option for renting DVDs.

  16. Jo says:

    I find people’s approach to Netflix’s price hike rate rather odd. If everyone who has been using Netflix forever, used the same amount of energy to go after Congress for the way they are treat American citizens, perhaps there would be an interest from Washington.

    I am not trying to change the subject here; I do, however, see an amazing parallel that could be put into action. Many of us get angry with unexpected price hikes, but we don’t do anything about it. But when it came to Netflix, of all things, many were quick to take action.

    Why can’t we use this same approach with what’s been going on in Washington. There doesn’t have to be any threats, a show of violence like the Europeans seem to enjoy, stealing, etc. Just let Washington know that we will indeed boycott (fill in the blanks). See where that takes us.

    As for Netflix, I cancelled altogether because I had little time to watch the movies. This occurred a day before their announcement of their price hike. How crazy is that?

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