ACG Research

ACG Research
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Wednesday, July 20, 2011

More on Netflix

A reader wrote in response to the Netflix blog:

I have been a loyal Neflix customer to 8 years. Recently my Cable Internet Service Provider (IPS) hit me with their data cap limit. I had to get a business internet account for $40 more a month to keep internet access due in part to Netflix.

Now Netflix is basically trying to hit me with yet another hike in my monthly bills only 2 months after swallowing the additional $40 from my ISP. This is very bad timing on Netflix part. I would have accepted a hike in the rate of a DVD, streaming account for their existing customers but not a %60 hike.

I buy through Amazon a lot so their Amazon Prime service for an annual fee of $79 charge and will let me have "free" 2 day shipping and includes video streaming looks like a great alternative. It does not have the large Netflix library but the service is new and is expected to grow fast. There are other alternatives.

5 of the Best Streaming Media Services Compared
February 14, 2011. This maybe different now that Netflix thumbed its nose at all its existing customer base.

Hulu Courts Buyers, While Netflix Streaming Surges
Jul 7, 2011

Amazon Prime Instant: A Closer Look
February 22, 2011 - This article provides a chart of prices across the main video streaming competitors. This article is mainly focused on Amazon's offering but does compare it to the other offerings.


Thanks for your input you highlight two important aspects of the business. There are competitors and reasonable alternatives, including Amazon and Hulu, and that the bandwidth utilization can be a catalyst for ISPs to raise rates or institute caps.

As you mentioned each has its strengths and different content libraries, so most users go for the service that suits them best. Amazon is great if you are already a Prime customer, but for those who are not big Amazon users, the value proposition is less compelling. Hulu is great for its library of TV shows, but is weak on movies. Netflix's price hike will certainly turn away some users, but I still believe that at $8 for streaming-only, it is still a very competitive offering given its library. The real change in price was in the bundle for both services, for people who use only one service (streaming or DVD) will not see any change.

Relative to rate caps/tiered service plans - these are inevitable because the ISPs are making massive investments to keep up with the demand and they have to earn a return on their investment.

David Dines

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