The e-mail sent to Netflix subscribers last week couldn’t have been more perfunctory. “We are separating unlimited DVDs by mail and unlimited streaming into two plans to better reflect the costs of each,” the note ominously began. As the bad news piled up in one short paragraph after another, the bottom line became painfully evident: Some customers were getting slammed with seemingly out-of-nowhere prince increases of up to 60 percent, with the biggest impact being felt by customers who enjoy receiving physical DVDs by mail.
Almost immediately, bloggers, reporters, and everyday consumers took to the Internet to voice their disapproval. Some of the most entertaining reactions were from mainstream journalists like the financial reporter from the New Your Times who got on the phone with a Netflix representative and tried to get the poor guy to admit Netflix had, up to last week, drastically underpriced its service — as if labeling the price change a course correction could stem the tide of anger from disgruntled customers who said they planned to downgrade their current Netflix plans or stop doing business with the company entirely.
A week later, the whole sordid story of Netflix’s altered business model is still front-page news in certain quarters. Observers are carefully watching for fluctuations in the company’s stock price, pundits are lamenting that the move is a conspiracy to kill DVDs (a silly assertion, since the movie studios already did that by greedily introducing Blu-Rays), and people like me are crunching numbers to see how much the previously inexpensive practice of getting DVDs by mail is really worth.
Major forces affecting wide swaths of the entertainment industry are at play here, which is why the Netflix shift is more than just a one-day story about customers griping when inflation hits their leisure activities.
For one thing, there are new warning signs every day about the dangers of barreling forward into the digital-entertainment future. This week, Borders Books and Music announced it was shutting down for good, another signal that consumers have largely shifted book-buying to the Net. Big-name record stores have all but disappeared. Big-box stores like Best Buy, department stores like Target, and wholesale warehouses like Costco are regularly shrinking the amount of floor space they dedicate to packaged media.
Behind each of the major changes in the packaged-media industry is a nasty blast radius. The loss of bookstores means it’s now more and more difficult for readers to discover new authors. The loss of record stores underscores that in the battle between music companies and online thieves, the thieves won. And the shrinking floor space in big stores means that only the biggest names will get regular exposure to general customers. In sum, variety is the victim.
And so it goes with Netflix. I’ve been a Netflix subscriber for about seven years, and up till now, I’ve been a happy customer. My taste runs toward the somewhat esoteric, with a particular predilection toward older films. Although I watch the occasional release (usually indie product), in some ways I’m an ideal customer: I use the service but don’t tie up any of the company’s five zillion copies of high-demand titles like Harry Potter or Transformers.
Over the last year, however, I’ve witnessed steady attrition of my queue. (For those who don’t use the service, the queue is a waiting list of titles from which movies are sent as returns are received.) Every week, I notice two or three titles dropping out of the active queue into the “saved” section. These are all obscure titles of which Netflix presumably purchased only a handful of copies. Therefore, I can only assume that’s what happening is copies are not being replaced after they degrade from use. These adjustments now happen with such frequency that Netflix seems to have retired the dreaded “unavailable” status; now, everything the company doesn’t have is labeled as “saved,” like it will magically reappear at some point.
And that, of course, is the crux of the conspiracy theories pundits have expressed. Since Netflix is, in effect, pushing customers toward an all-streaming model by making the DVDs-by-mail model much more expensive on a per-unit basis, the conspiracy theory holds that Netflix is trying to make customers so irate about titles they can’t get on DVD that they will demand those titles on streaming. (Streaming costs Netflix less than sending DVDs by mail.) In turn, Netflix hopes this demand will force studios to go all-in with streaming, putting their entire back catalogs online.
Which, in turn, would no doubt prompt an even bigger price increase from Netflix.
The annoying part of all of this is that even though it feels like I’m being used as a pawn (which is, ultimately, the subtext of every consumer complaint about Netflix in the last week), nobody’s actually doing anything wrong. Netflix is welcome to charge whatever it wants, just like I’m welcome to stop patronizing the company. It happens that they offer a service I want, and though the recent price increase may prompt me to reduce my Netflix plan, I probably won’t quit the service entirely.
Similarly, Netflix is under no obligation to replenish DVDs of esoteric titles, though it’s arguably in the company’s interest to do so, since being able to boast of a huge catalog has been a mainstay of the video-rental business since there’s been a video-rental business. And, of course, the studios are under no obligation to submit to Netflix pressure and put every movie that’s ever been made online; why shouldn’t the studios keep pushing for the larger profit margins of packaged media?
So, finally, what it all comes down to is change. Netflix has been a steady presence in the lives of millions of consumers for several years, and its prices have long seemed like a bargain. Now, however, the prices aren’t so great, the selection is dwindling, and the company’s Machiavellian techniques seem creepy. With one e-mail, the public perception of the company changed. Even though I’d seen the writing on the wall for some time, I was startled by the abruptness — and, quite frankly, the arrogance — of last week’s move.
Changes like the new Netflix reality put consumers into tricky positions. Normally, the consumer choice is relatively simple: whether to buy a product and where to make the purchase. Now, all sorts of other factors weigh into the decision-making. Does patronizing an online bookstore put another nail in the coffin of brick-and-mortar retail? Does dropping Netflix and moving to, say, Blockbuster simply give another company the edge even though all are playing the same games? On a much larger level, can anything be done to stem the tide of giant corporations deciding our collective fates with their brazen financial maneuvers?
All of this may seem like a lot of fuss to make about a price adjustment at a video-rental service, and perhaps in a year or so, the market will have corrected itself in such a way that the choice and pricing previously found at Netflix returns there or elsewhere. Just as change prompted last week’s upheaval, so too may change prompt its welcome response.
But no matter what happens with Netflix, there’s more at stake here than how we entertain ourselves. These seismic shifts get at the very character of our nation, since aren’t consumers supposed to be the driving forces in a capitalistic economy? For a brief period, sometime between the booming ’90s and the busting ’00s, consumer demand drastically altered the shape of the entertainment industry, since the exodus of customers to the Internet decimated brick-and-mortar retail. For a fleeing moment, it seemed as if customers really were in charge (even though I hated how customers wielded that power). But now, like a nasty splash of water waking someone from a happy dream, a big business previously held in high regard by its customers has asserted itself in a way that seems contemptuous of consumers. Worse, the company didn’t even pretend to care about the inevitable blowback.
“We realize you have many choices for home entertainment,” read the last paragraph in the Netflix e-mail, “and we thank you for your business.” Apparently not.