Netflix Nixes Cheaper Plan, Vexes Viewers

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A price change that won't affect many customers of America's leading video subscription service — and may save some of them money — has a lot of those people mad.

On Tuesday, Netflix announced on its blog and in a press release that it would change some subscription rates. While the monthly cost to watch unlimited movies and TV shows streamed over the Internet would remain at $7.99, its DVD-by-mail service would drop from $8.99 a month to $7.99 — but the cost of a combined streaming-and-DVD plan would jump from $9.99 to $15.98. Existing subscribers will switch to the new rates on Sept. 1, while new sign-ups pay them immediately.

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Los Gatos, Calif.-based Netflix's statements led with the DVD price drop, but the reaction has focused on the 60 percent price hike for its combination option. Reviews of that move have been mostly negative; apparently, enough subscribers called to complain that its phone lines jammed on Wednesday. Competing movie-rental services like Blockbuster, just purchased by Dish Network after its bankruptcy filing, chimed in with promotional offers (which may not represent a good deal).

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Considering that Netflix recently edged past Comcast to become the biggest subscription video provider in the United States, with 22.797 million subscribers nationwide (PDF) to that Philadelphia-based cable company's 22.763 million, any shift in pricing should rank as a big deal.

But the majority of Netflix customers shouldn't notice this one. The company has more people signed up for streaming-only plans than for DVD offerings, and those web viewers won't pay a cent extra. DVD-only subscribers get an outright price cut, something unheard of in cable and satellite TV subscriptions.

Only people looking to complement web viewing with DVD releases — an option unavailable at such competing streaming services as Amazon, Vudu and Hulu — suffer. And while almost $16 a month remains cheaper than taking two people to a movie, Netflix subscribers may now feel they have to make an atoms-or-bits choice: either a series of red envelopes in the mailbox or a stream of ones and zeroes over their broadband connection.

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If you want the most selection, DVDs trounce streaming. Netflix has about 12,000 titles available for streaming (as estimated by a third-party site, Instantwatcher) but "more than 100,000" on disc (spokesman Steve Swasey wouldn't get more specific). Further, new titles take longer to show up in the streaming catalog than on disc — then vanish from it at arbitrary timetables.

For that, you can blame Hollywood's convoluted "release window" business model, which tries to maximize a movie's profits by artificially constraining its availability in particular distribution channels. (Were this post to be offered along those lines, first you might have to pay to hear me read it in person, then you could peruse it on your computer, and eventually you could purchase a print copy.)

But clicking a "Watch Now" button to view a movie over the Internet has a spontaneous convenience impossible with discs-by-mail. Further, those "watch now" buttons exist in a growing variety of living-room gadgets that connect to Netflix: HDTVs, Blu-ray players, TiVo digital video recorders, Apple TV and other streaming-media receivers, video-game consoles and smartphones and tablets.

Netflix, in turn, has a simpler distribution system to run with streaming.

That company clearly sees streaming as the future. But if it wants to push people away from DVDs, it needs to explain how it will fix the frustratingly weak selection of streaming titles that has so many viewers feeling they need DVD rentals as a backup.