I Eat Ewoks

What Netflix Isn’t Saying

Netflix jacked their rates for Instant Watch + DVD delivery and gave a lame-ass excuse for it. It was calculated to be lame, however, because if they used the real reason for it prices might go even higher.

The Internet’s memory is short so let’s go back a week ago to when Netflix lost the Sony movies and almost lost Starz. Why did that happen? Netflix WI subscribers passed a certain number specified in the contract with Starz and Sony and so they lost the right to stream that content. After some talks they came back online and now, one week later, Netflix is breaking apart their WI subscribers from their DVD subscribers. I find it hard to consider this a coincidence.

Having a ton of DVD viewers that are not using WI artificially inflated their WI subscriber numbers and almost invalidated a content contract. The only way to lower that number is to remove their access and only let people that want WI subscribe to it and pay into the service. So now WI isn’t a bundled service but one you ask for and pay for. This way, Netflix lowers their perceived WI subscriber count, keeps their content deals without renegotiations, and generally carries on.

So yes, it does seem like we are paying more for the same thing, and we are, but it’s not really Netflix doing this. Keep in mind also that in the last week we heard the news that while their current licensing is around a couple of million a year that by the end of 2012 the licensing costs are projected to be 2.1 billion-with-a-B dollars a year. They only made about $130M in profit last year. So while this rate shuffle is annoying, by the end of 2012 it’s just going to get plain bad, and it’s not Netflix doing it — it’s the studios.

Let’s direct our hate to those that deserve it, then. Netflix is caught in the middle here as they’re abiding the first rule of negotiating with a Goliath: never speak ill of your opponent, especially if they deserve it. They’re taking the flack for something out of their control, and it’s only going to get worse for them.

Later: It seems USA Today agrees.