Last week Netflix raised their rates, increasing the price of some plans by as much as sixty percent. Where before a plan with one DVD out at a time and unlimited streaming was $9.99 per month, the same service will now cost $15.98. Ouch. The outrage online was swift and furious. Customers were losing a great deal and weren’t shy about bashing Netflix on Facebook and blogs. As someone who uses Netflix heavily as a replacement for cable, I was among the outraged. (I’m still deciding what to do with my subscription: scale back, keep it as is, or cancel altogether.) Once I got over my shock I realized that Netflix’s action has reminded me of a few key financial/consumer lessons that apply to all kinds of goods and services.
A price increase might not break the budget, but it does have to be considered: No, an extra $6 per month isn’t going to break my budget. I can afford it, but it doesn’t mean that I like it. And it doesn’t mean that I’m going to pay it. When something that isn’t strictly necessary goes up in price, I have to evaluate whether or not it’s still worth it. Do I get enough value out of the service to justify the increase in price? In the case of large price increases, can I trim another area of my budget to cover the new cost? Do I want to do that or is the other choice more important/valuable to me?
Most of us have a finite amount of discretionary money. When something goes up in price, choices have to be made about what to keep, what to cut, and where the extra money will come from. In the case of Netflix, while $6 isn’t a huge amount it does become problematic when added to the recent price increases I’ve seen for many other things I use. Eventually something has to give and the budget has to be remade. Netflix is still a good deal compared to cable for me, but at the new price I have to ask myself if I use it enough to justify it or if I should drop down to a cheaper alternative. While it might not break me to keep things as is, a price increase requires evaluation.
Always push back: I’ve enjoyed reading a lot of the comments posted on Netflix’s Facebook wall and blog. While some have just been foul mouthed rants, many have been carefully considered arguments against the increase, eloquently expressed disappointment, and well-considered suggested compromises. People are exercising their right to push back at the company rather than just take poor treatment.
As a consumer, you have the right to complain and to take your business elsewhere if you no longer care for the way a company does business. Whether it’s Netflix, a phone company, a clothes manufacturer, or a grocer, you have the right to express frustration and dissatisfaction. It might not make a difference every time (as of this writing Netflix hasn’t changed it’s mind about the price increase), but it does let companies know when they’ve done something wrong or upsetting. The only way some companies are ever going to know how their actions affect customers is when those customers tell them. So speak up if you’re dissatisfied with a company, but remember that the most successful complaints are often the most polite.
Find alternatives: It’s my job to find alternatives when a price increase derails my budget. I can either find a less expensive alternative service that’s close to what I had (in this case I’m looking at Redbox, Hulu, and Amazon’s streaming service), or I can find something new altogether. As consumer’s we’re free to vote with our wallets and to give our money to the company that provides the best bang for the buck. If that’s Netflix, great, but if it’s someone else it’s your job to find that out and make the switch. Don’t just blindly pay the increase without looking at other options. This goes for every good and service you buy. It’s a big marketplace and there are lots of companies that want your money and are willing to compete for it.
In the wake of Netflix’s increase, I’m realizing that I was spending too much time watching TV. This was part of why I got rid of cable, but slowly I’ve given more of my time to DVD’s and streaming. If I cancel Netflix and use Redbox, it will be a good way for me to control my watching since I’ll have to drive to a store to get a movie. This is a good chance for me to get back to my reading and other hobbies. So, in a way, the increase is a positive for me. It may force me not only to consider alternatives for TV viewing, it may force me to consider alternate activities, as well.
I can afford this price increase without tearing my budget apart, but I’m reminded that it always makes good financial sense to consider all of the alternatives and evaluate that value of any service. Some people I know are opting to keep Netflix, but are trimming their cable expenses or dining out budgets to cover the increased cost. Others are trimming their Netflix plans back to keep the cost close to what it was. To them, Netflix is worth the adjustment. In my case, Netflix likely isn’t worth the price anymore. There are other choices and other things I’d rather do with my time. In either case, we are acting as informed and conscientious consumers instead of blindly paying increases on discretionary items. That’s a big part of successful budgeting.