What is Netflix doing with their company?

If you wanted to watch a movie 15 years ago, you’d either wait for the cassette (or DVD, for the younger generations) to become available in the stores, or you would stop by your local Blockbuster video store, and rent it out from there. Depending on where you lived in proximity to one of their brick-and-mortar stores, this could be either a convenience or laborious. However, as the internet blossomed, and DVDs replaced video cassettes as the main source of motion picture media, the idea of a online video rental delivery service became much more appealing. Netflix single-handedly turned the video rental world upside-down with their business, offering a wide selection of films at reasonable prices, with no penalties for late returns. It was revolutionary for its time, and led to a massive collapse of Blockbuster as a company, who failed to increase their market share by taking advantage of the online medium until it was much too late.

However, Netflix has managed to shoot itself in the foot with all of their recent business decisions. First, the company announced that they would be raising the prices of their monthly fee from $10 to $16, and that the streaming media service would be separated from their DVD delivery service, which will now be repackaged as Qwikster. What’s more is that they have also imposed a download limit on streaming video for some accounts, making it more difficult for customers to watch what they want.

I find it very ironic that the company that’s helped to redefine the video rental industry is slowly becoming the one that’s going to destroy it altogether. For one, this is ultimately bad timing, given that they’re raising prices for their product while we’re going through an economically unstable time. This pressure by Netflix is also coming from Hollywood itself, who is losing money thanks to the advent of illegal online streaming and torrents. But I just don’t see how their recent moves benefit them at all – raising prices on anything that isn’t a necessary evil like food or gasoline will end with customers leaving your product for cheaper alternatives, and I feel that this, if anything, will encourage more of the online community to piracy via the illegal streams and torrents. It might drive more traditional moviegoers to drive to their local store and buy the movie, or visiting a local Redbox. But apart from that, this will not only hurt Netflix as a company (as it already has, since they’re leaking wildly in their stocks since their announcements), but it could even hurt Hollywood as an industry by turning people away from renting, and more towards pirating movies.

Sure, this is a particularly extreme way of looking at things, but I just feel that Netflix’s service is more of a cash cow – either way, if they maintained the product that they had, they would make money, and nobody would turn away. With their changes, they would still be making money, but with a lower customer base, that income might just amount to what it is that they were making before they imposed the changes. Basically, I don’t think their changes would improve their income, and it hurts them because now they’re working with less people and lower stock. They’ve essentially set themselves back a few months or even a year. It doesn’t seem to look promising for Netflix, but I can only see this angle from its face value, and I know there are some aspects that I might be missing. I’d like to see what you guys think about this whole situation – what do you think Netflix could do to regain their customer base? With all of the different features being introduced like 3D movies and Blu-Ray, do you see a justification in the price hike? And will any of this make a long-term difference? Let me hear what you think in the comments below!

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