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Netflix Headquarters (image via wikipedia)

Netflix – Down but not out

Posted By Cerillion , 22 July 2011 | 0 Comments | (0)
Tags: OTT netflix cable TV Customer Experience

I wonder how many Cable / MSOs are watching the firestorm around Netflix’s recent price rises and not enjoying the moment?

Only last month I was hearing at The Cable Show about the threat from over-the-top (OTT) video providers, with the main operators worried about the ‘cord-cutting’ of their cable TV services. So the woes of Netflix must be music to the ears of these under-pressure Cable providers.

 

For those who’ve missed all the excitement, Netflix provides OTT streaming video and DVD rental services in North America, with a very simple flat-rate pricing model in various packages. The problem is that as of last week, the prices have all gone up significantly, notably their entry level package which was $9.99 per month is up 60% to $15.98. In essence they have split their video streaming and DVD rental services and created new prices of $7.99 per month for each. And unsurprisingly, their subscribers are very unhappy at the price hike and have taken to Facebook and Twitter to voice their frustrations.

 

Though it is very easy to rant on social media and then not do anything about it, results of a survey of more than 7,500 people on Mashable  say that 38% will be cancelling their Netflix account completely. Worrying signs indeed.

 

Analysis of the pricing changes by CNN Money points not to the greed of Netflix, but the necessity to generate more revenue to cover spiralling costs of the content agreements with the various studios.

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It’s a case of change the pricing model or go out of business very quickly. So a very attractive price plan that appeared to be too good to be true, probably was.

 

Though customers are attracted to these OTT video services because they are cheap, but still legal, if you expect your OTT provider to offer the latest premium content then you should also expect to pay a premium for it. The giant film studios spend millions creating and promoting their latest movies, and will negotiate accordingly when it comes to their distribution.

 

The Cable / MSOs, and to a lesser extent the Telco IPTV providers, know this already as they’ve been doing this for many years – striking the right deals with the studios is crucial to the viability of the services they provide.

 

However it’s no time for complacency or to laugh at the bad PR that Netflix has encountered. The Cable and IPTV providers must learn quickly from the OTT product packaging, user interface and customer experience, in order to build a more compelling proposition to their subscribers. There is a window of opportunity to capitalise on Netflix’s difficulties, but that window will close fast.

 

According to comments posted online, it seems that some of their customers are hoping that by increasing their prices, Netflix will be able to offer newer and a wider catalogue of streaming content. So whilst the price may be going up, the value of their services will increase too. Netflix are re-balancing their business model and if they get it right, they will be a huge threat to the Cable and IPTV providers for many years to come.

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