Lisa Wu, a Comm 101 classmate of mine, recently made a blog post on Netflix’s fall from grace. I agree with most of Lisa’s points on Netflix’s failure to anticipate the loss of subscribers as they increased their prices. Lisa’s argument is that Netflex did not realize that DVD/Video Streaming services had such low price elasticity. As they increased their prices, a significant amount of subscribers would terminate their services. I would like to take another approach on this. Yes, although I do believe that Netflix had its faults in increasing price, it was inevitable. As Netflix became a success, the movie studios that supplied Netflix the movies also wanted a healthy share of the pie. Because Netflix was not extremely popular in the past, Studios could licenced their content to Netflix at bargain basement prices. Now, with Netflix’s success, studios also want profits. An article by CNN estimates that the price of Netflix’s content will increase from 180 Million in 2010 to an astronomical 1.98 Billion in 2012. That’s an 11 fold increase! Netflix must negotiate better deals with studios and regain the trust and loyalty of their consumers. Otherwise, Netflix is doomed.
(Are they really greedy when their costs have increased significantly?)
https://blogs.ubc.ca/lisawu/2011/10/25/netflix-bad-move/
http://money.cnn.com/2011/07/08/technology/netflix_starz_contract/index.htm
http://politicalhumor.about.com/od/politicalcartoons/ig/Political-Cartoons/Netflix.htm