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Does Netflix Want Out of the Disc Business? Say It Ain't So!

Aug 15, 2011 5:33 PM, by Jason Bovberg

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I've had several discussions with friends and coworkers about Netflix's recent decision to separate its streaming and DVD/Blu-ray services in the United States. Admittedly, the company's move was bold, and it felt like a slap in the face even to me—probably one of the most amiable and easygoing cinephiles you're likely to meet. "Outrageous!" was my first reaction, and my second reaction was to determine which of the services I would chop from my existing options. Because—make no mistake—if Netflix was going to have the temerity to blast my fees up, I was going to damn well drop at least a portion of the service from my bill. That'll show 'em!

After all, we're talking about a 60-percent increase in fees. If you were paying $9.99 for unlimited streaming access to the Netflix library and unlimited DVDs by mail, you're now looking at separate fees for streaming ($7.99) and DVDs ($7.99), adding up to $15.98. And if you're on the Blu-ray plan, add another two bucks on top of that.

My cries of "Outrageous!" were echoed throughout the virtual nation. Across all social networking sites could be seen exclamations of outsized anger and Netflix-dismissal. The question wasn't whether these Netflix users would be dropping a portion of their existing service, but which portion they would inevitably drop and how soon.

My own first thought was that I would drop the streaming service, which—for a high-def aficionado—is saddled with too many disadvantages to carry forward at an elevated cost. Bandwidth issues mean that true high-def streaming perfection is still a long way off, and the selection in Netflix's streaming library is quite limited compared with the DVD/Blu-ray library. That was an easy knee-jerk decision for me, but Netflix clearly made its decision in favor of the streaming option and at the expense of the DVD-rental option. The cost of mailing the discs—not to mention the cost of labor to receive and send the mailers and manage the disc inventory—is certainly very high. Netflix is banking on the gradual obsolescence of disc and on the inevitable rise of streaming technology.

And it's true: Most of the users I spoke to are choosing the convenience of the streaming service over the increasingly dinosaur-like DVD-rental service, preferring instant access over the comparably interminable mail-in option. Is it fair to say that 75 percent of Netflix subscribers will be dropping the disc option? 80 percent? 90 percent? And if those high numbers are the case (in my experiences, they're probably pretty accurate), then Netflix's price hikes seem like a strategic move to hasten "gradual" obsolescence of the disc. Indeed, the new pricing structure doesn't even affect those who have had only the streaming option all along!

Apparently, Netflix wants out of the disc business.

But, we don't yet have final numbers, and this is all guesswork. Let's just say that either way, most people—on hearing the announcement, seemed to be on their way to at least cutting out half their plan.

(Interestingly, among the Netflix subscribers I spoke to, the majority of them have chosen to cancel a portion of their service—and in some cases, their entire subscription—immediately, regardless of the fact that the changes don't take effect until the beginning of September. That's how steamed they were! "It's the principle of the thing!" And some of these people claim to be using this price-hike as an excuse to cancel a service that they haven't found value in for a while: "Well, I've been meaning to cancel Netflix for a while anyway, so this just seals the deal. Bye bye, Netflix!")

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