Netflix Raises Prices, Internet Explodes Without Thinking

Things cost money; Internet doesn't understand this concept.

By , Contributor

Like DVD's and Blu-ray? Like Netflix streaming? Have $16? Then what's the problem?

Netflix made the announcement yesterday that a combo plan of one DVD out and streaming would run a customer $15.98 per month, an increase of 60% over their previous bargain bin pricing. This all kicks off September 1st.

The Internet imploded, social media sites angrily expressing their dismay, trending topics on Twitter were all about Netflix, and blogs ripped the company apart for this outrage.

Except, they shouldn't have.

See, things on the Internet, believe or not, cost money. That $9 a month you were paying before? That was a pittance. Even with 23 million customers, a single streaming contract can run Netflix multi-millions for only a year. In 2012, either the world will end first or Netflix will have to fork over 60% more for basic streaming rights when a large potion of their contracts are up. If yesterday's announcement was any indication, my money is on the world ending.

The reality of it all is that in a streaming world, the studios don't need Netflix. Netflix needs the studios. If anything, the studios love Netflix because the rental giant is doing the work for them, training a populace to devour digital content en masse. Eventually, when they're ready, Warner, Fox, Universal, and the rest of their ilk can say, “No!” They don't have to offer their content to anyone; after all, it is their content.

Most of the companies are already beginning to hop into their own streaming services, the Warner Archives offering specific classic content available nowhere else other than Warner. Sony has Crackle, and Universal offers streaming though BD-Live, an online Blu-ray portal. Their cogs are in motion, and Netflix's sprockets are wearing down. Separating the plans was their first step towards salvaging this business model, which of course exploded. Who wouldn't want all they can watch for $9 a month? In that same sense, who wouldn't want all they can watch for $20 a month? That's still 80% less than a typical satellite or cable bill.

Either Netflix charges more or the studios go away because Netflix isn't paying them enough. That, or you could just keep on pumping discs into a drive instead of giving the studios full control over content you purchased... but that's another article all together. Movies are worth something, more than you or I probably realize. This is about more than childish comments like "get a job if you can't afford it," and I'm usually the first one to rant when prices go up. In this case though, it makes sense.

Just because they're available for free on some co-worker's burned DVD collection or on Netflix streaming doesn't mean the cost to the actual owner isn't there. If you want to blame anyone, blame the general populace who actually seemed to think it was possible to keep such a cheap pricing model alive for so long. I mean, ask a question of the money-making part of your brain. Would you:

A. Offer your films and TV shows to a third party company who devalues them to $9 unlimited?

B. Up the price of your contracts to at least make better margins?

C. Sell the stuff yourself at a higher rate because people won't actually have a choice anymore?

If you answered C, you're thinking like a studio. They're simply letting Netflix do the heavy lifting while executing B.

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Matt Paprocki is a 13-year veteran of the video game, movie, and home media scene. He has written thousands of reviews, has been published on a variety of websites, and contributes his thoughts daily on a diverse range of topics.

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