Direct Line Blog

Dear Netflix: I'm divorcing you. You can keep the DVDs.

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Netflix knows I'm upset but it isn't really worried. The online movie rental company posted a second-quarter revenue increase of 52% to $789 million compared with Q2 2010. The earnings fell short of Wall Street predictions, but the number of global subscribers increased 70% to 25 million, and nearly 75% of those new customers signed up for streaming-only plans, which is exactly what Netflix would like customers to do.

Despite all the hoopla around the Netflix pricing change — including more than 28,000 angry Facebook comments within 24 hours of the announcement — that warned of a 60% price increase for DVD plans, Netflix remained steadfast and defiant in its July investor letter. 

“It is expected and unfortunate that our DVD subscribers who also use streaming don't like our price change, which can be as much as a 60% increase for them from $9.99 to $15.98, when it goes into effect for each subscriber upon their renewal date in September,” the company said in the letter.

Netflix added that it expects domestic net additions in Q3 to be lower than Q3 2010. However, “in Q4, we expect domestic net additions to return to a pattern of year-over-year growth while revenue will reflect a full quarter's impact of the pricing changes, which could result in Q4 being our first billion-dollar global revenue quarter, driven by strong US performance.”

Basically: Hey Juan, if you're mad, don't be. If you leave, you'll come back. We'll be here waiting for you when you do.

Don't be so sure, Netflix.

Since the price-hike announcement, I've browsed the impressive Vudu selection on my Wifi-enabled Blu-ray. For $3.99, I can purchase any movie, including new releases, and I can watch them all in hi-def. With Netflix, I can stream a weak selection of movies or I can have them mail Blu-ray discs to me (for an added-added Blu-ray charge, by the way!).

(Wal-Mart, which owns Vudu, is moving the video streaming and rental service to the Walmart.com landing page, the company said this morning.)

I'm someone who doesn't abuse the Netflix system by returning discs the night I receive them in the mail. I take a few days before I watch the disc and send it back whenever I'm sure I'm done with it. After all, some movies need to be watched twice. See: Warriors, The.)

For me, it might make more sense to pay Vudu four bucks a la carte rather than forking over $16 to a company that obviously doesn't understand the combination of the letters C, R and M.

As a Vudu customer, I might watch fewer movies each month, but the ones I watch will be new releases in hi-def available at the touch of a button. I won't have to worry about waiting three days to receive a disc or streaming the junk available on my LG Blu-ray Netflix app.

More importantly, I won't be rewarding a company that clearly isn't worried about whether or not I take my business elsewhere.

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