This week Dave Tomar, Matthew David Brozik and myself took on Netflix’s recent price hike in the Perpetual Post. My side is below. You can read the full piece here. Trust me, the fur flies!
MOLLY SCHOEMANN: Hey Netflix, don’t stream on my shoes and tell me it’s raining. Your new, higher, “a la carte” pricing for previously combined, low-cost services is just bad business.
You could have at least given your customers the courtesy of pretending as though you aren’t trying to wring every last cent out of them, the way cable and internet providers have been doing forever: Simply let your monthly pricing creep up gradually, month by month, year by year, so that I don’t even realize how much I’m actually spending until I’m taking out a second mortgage to pay for cable. It’s like giving me a soothing backrub as you steal my wallet. At least it shows you care enough to hide what you’re doing to me from me, instead of just hiking your prices right in my face and expecting me to smile wanly and fork over the extra cash.
And I don’t buy the argument that this new pricing is fair because the original price for these services was so cheap that we should just appreciate how great that was. You’re damn right, the original price was cheap, and I liked it that way! I like things that are cheap! And I don’t need a price hike to make me realize how cheap something formerly was. You know what really makes me appreciate the cheapness of something? Keeping it cheap! As an analogy, right at this moment, I also appreciate the fact that my big toe is not throbbing in terrible pain. Should I hit it with a hammer, then, so that I can remember even more clearly how great it felt before I did that?
Nor do I understand the logic that since the price hike is only $6-7 bucks a month for the average household, it’s not such a big deal. Sure, that’s not a large amount. But when I consider the fact my monthly bill of $9.99 is going to increase by about 60%, to $15.98, and for the exact same services I’ve been getting for $9.99, I feel very indignant. No, the extra $6 is not all that stands between me and starvation. I can afford it. But is that a valid defense? That most of your customers can afford the price hike? Most of my friends can afford to give me $5 a month for the exact same level of friendship I have been providing them for years for free. But is fair for me to ask for it?
And if this price hike is because the cost of streaming is higher than Netflix originally forecast, well maybe they should have done their homework on that when they were originally designing their pricing model. That’s part of their job; to price services in a way that is both profitable for the company, and reasonable for the customer. Now I’m supposed to pay an extra $70+ bucks a year because someone in accounting forgot to carry the one?
All over the internet, Netflix customers are muttering angrily that thanks to this price hike, they have canceled their accounts, or are strongly considering canceling them. And perhaps Netflix was even counting on this. Perhaps they did the cold hard math and realized that if 40% of their customers desert them over this astronomical price hike, they’ll still be making more money than they ever were before, thanks to the revenue brought in by said price hike. But the problem is, it’s not just about the money, and you would think Netflix would know this. A big part of staying in business relies on customer loyalty. For whatever reason, Netflix customers have long tended to be extremely loyal. Perhaps it’s Netflix’s legendary customer service or their keen ability to understand the utter depths of our laziness. Everything about using Netflix IS ridiculously laid-back and easy. And those little red envelopes are so cheerful. But there is only so far these things can go, in the face of such cruel pricing practices. And customer loyalty, so gradually attained, is extremely hard to win back after a gaffe like this.
Those customers who don’t desert Netflix in droves; the ones who hang on and swallow their pride and pay the increased pricing—they won’t have the same love in their hearts for Netflix anymore. They’ll stay, but they’ll be watching the horizon for the dawn of the Next Big Lazy Movie-Watcher Service Provider. And they probably won’t have to wait long. It feels like every time you turn around, there’s a new, even easier way to rent or stream TV shows and movies.
I’m convinced that this is going to be your ‘Let them eat cake’ moment, Netflix. You should have continued to offer cheaper cake.