The Downfall of Netflix

Earlier this year, Peter was floored to get a notice from Netflix essentially informing us that if we wanted to continue having the same service they’d been giving us, we’d have to pay nearly double each month. We’ve been Netflix subscribers since 2000, and until then, we’d loved what they offered. Before then, if we wanted to watch a movie in our home, we had to traipse over to a Blockbuster, the now-defunct Hollywood Video, or a dodgy strip-mall joint typically next to a liquor store. The second you paid for your rental, a clock started ticking, and god forbid you should wait an extra day to watch that second movie, or slip it into the video return slot 5 minutes after closing, or you’d get hit with fine after fine after fine.

Netflix cured that. Not only did they have a way broader selection than any store, your rentals came to you and you could hang on to them indefinitely. Making a mistake, like losing the paper case for a DVD, or accidentally putting a wrong disc in its place only resulted in a polite e-mail, and a quick fix. More recently, they added streaming, so you could stream some movies directly without having to put them in your queue and wait for them to be delivered. We loved that, too: we went on a Western movie kick and streamed a whole bunch of classics night after night without having to wait in between. We talked about how forward-thinking the company was, and bought gift subscriptions for family members.

But then it announced a pricing and service change so extreme, it essentially forced us look at the alternatives to judge as to whether this was still a good deal. As it turns out, a lot has changed since 2000 when we started our Netflix subscription. First of all, while it was convenient, as is hopefully a future that doesn’t involve USPS, Netflix’ streaming selection is still fairly anemic compared to its DVD selection. We can get much of the same streamed content from Hulu, Amazon Prime, and iTunes, just to name a few commercial alternatives. If we want to play connectivity roulette and download video, there’s bit-torrenting, which has actually become the borrowed entertainment choice of our younger peers. As if in response to Netflix’ hamfisted business decision, Amazon Prime made much of its content available for free. We watched The Tudors and Breaking Bad that way, thanks to a Google TV Peter had won at CES this year, and Peter’s still using it to check out random TV shows and movies while he works out.

As for DVD rental, we discovered the field on that has changed considerably, too. Blockbuster still exists (with far fewer stores), but it’s seen the light. They now offer a rent-by-mail plan that competes directly with Netflix, except that they offer games as well, and let you make same-day in-store exchanges for new DVDs, all without any overdue fees. For old-school in-store-rental people, they also reformed their overdue fine structure, so while it’s still obnoxious, you can understand it. I also decided to be more pro-active in looking for the movies on my queue and seeing if they’re in the library, since we go there at least once a week. While the availability is extremely restricted, I got  Rio Bravo, Inside Job, Young Victoria, and more, and I could hold on to them for up to 3 weeks. I’ve also been seeing people using the RedBox kiosk at my local grocery store, where I understand, you can rent a movie for $1 a day. Peter and I take a walk past that grocery store almost every day, so while it’s fraught with the same hazards as Hollywood Video was, it doesn’t involve the snotty clerk and its costs far less.

In the end, Peter refused the streaming service, and downgraded us to 2 DVDs at a time, rather than 3, giving Netflix actually less revenue from us than they’d been getting before. Gauging by their financials, we were far from the only customers taking a hard look at the value Netflix was giving us in comparison to their contemporary rivals, and Netflix came up short. There’s still a place and a need for Netflix in the current economy. They still have a broader DVD selection than any of their competitors (except maybe Blockbuster) and many of those are on Blu-Ray. And they don’t have the ill will years of botched Blockbuster rentals created for us — although I just realized Blockbuster will rent games as well.

In short, Netflix screwed up by making changes and raising prices so dramatically that we were shocked enough to think of abandoning them, and to look around for alternatives. That was a bad decision, and now that we’ve looked, I’m not sure how Netflix is going to win back the many customers who found another place to go for their video rentals.