DVDs

Lessons Learned from the Netflix Price Hike

July 28, 2011 By Jennifer Derrick 16 Comments

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.

Are Restaurant Deals A Good Trend?

August 13, 2009 By David G. Mitchell 11 Comments

A few months ago, I wrote about the death of the DVD as a major delivery platform for movies. At the time, my local video store was charging $5 for five-day movie rentals and its stores were generally not very busy (based on my observations). By contrast, the local library was increasingly busy and even more increasingly devoting shelf space to DVDs.

Fast forward to the present, and the decline of the DVD continues. At the same time, Blockbuster has introduced new pricing models which make rental at times a more attractive option than the library. Blockbuster customers now have the added option of renting a new movie for $2 for one night or an older film for only $1. I love the new model and I admit that I am now occasionally going back in to Blockbuster.

I will gladly pay a dollar or two for a movie rental for a night after I have checked the library (less than a quarter mile away) to make sure that I cannot borrow the movie for free for a week. If my family really wants to watch a particular movie, the rental cost is consistent with the value of the instant gratification that Blockbuster is more likely to present, especially with respect to the rental of new releases. My local video store still is not as busy as it was three or four years ago, but the dollar rentals have made it busier than it was at this time last year, or so it seems to me.

I’ve noticed that a lot of local establishments are following a marketing plan that seems similar to Blockbuster’s. They are lowering prices. Restaurants in particular are offering some amazing deals on meals, including multi-course feasts. Throughout much of August, for example, Maggiano’s Little Italy is now offering a BOGO deal on its pastas as part of its “Today and Tomorrow” promotion. Other nearby higher end restaurants are offering deep discounts on three course meals and dinners for two.

Unlike the price reductions on DVD rentals or other hard goods, which I enjoy, I am not quite as certain that huge price reductions by restaurants are a good thing. With a DVD, whether I pay $1 or $5 or get it for free at the library, I am getting the same product. With food, however, we are much more likely to “get what we pay for.” If dinner for two cost $49 two years ago and the same meal is now offered for $25, how does the restaurant make any money?

I suppose that the restaurants may be relying on patrons to enjoy their meals with selections from the bar, and that a three course meal will ensure that several trips to the bar are possible. Nevertheless, I have to wonder how much of a bar bill patrons will run up if they are attracted to a restaurant by a deep discount on the food.

If restaurants are not using multi-course meals as loss leaders, could they possibly have been making so much of a profit two years ago that they can cut their prices in half now and still make money? I hope not because if that is the case, it will make every meal I have ever had in a restaurant seem more than a little tainted.

And that brings me to my third thought — could restaurants be cutting the quality of their ingredients in order to offset their lower prices? I know that if I want to cut my weekly grocery bill, apart from taking advantage of sales and coupons, I can seek lesser quality ingredients. While that does save me money, it also often cuts the value of the meals that I prepare and decreases the pleasure that I have eating the meals that I cook.

What do you think? How can restaurants cut their prices so much and still make money? Are they sacrificing profits or cutting back on quality? What do you think?

The Death of the DVD

November 28, 2008 By David G. Mitchell 21 Comments

If you came of age in the days when you might have had 8 or 9 channels that you received on your television, before cable and VHS, you remember that if you wanted to watch a movie, you had to see it in a cinema or wait for it to be rebroadcast. Sometimes, the rebroadcast of a film would be a major television event, as always seemed to be the case in the early 70’s when The Wizard of Oz or Gone with the Wind were shown.

In the 1980’s, VHS tapes became commonplace. No longer were we limited by the whim of television programmers. We could purchase movies for a reasonable price and watch them whenever we wished. We could even rent movies for an even cheaper price, watch them and return them. We could control our own programming.

Fast forward ahead to the mid-1990’s when DVD technology began to bring digital film to our homes. DVDs could hold even more content that VHS tapes and the quality was significantly better. We were soon able to purchase entire television seasons and control when and where we watched our favorite TV shows. It was suddenly possible to watch television shows without commercials.

Not surprisingly, Americans and people the world over quickly adopted and embraced DVD technology. Millions and millions of DVDs have been sold over the past decade-plus. DVD players are now almost standard features in many models of automobile that are currently being sold.

Now we are approaching Christmas, Chanukah, and other yearend holidays. Gifts will be purchased and many DVDs will be among them. Unfortunately, the day of the DVD is drawing to a close and DVD recipients will soon find themselves with DVDs that they probably will not be using.

I have been tracking the demise of the DVD for the past several years. In 1984, I began my conversion from the long playing record (LP) to compact disc. Over the ensuing decade, I eventually found ways to eliminate several thousand LPs from my collection, only to add a thousand CDs. As I wrote in Five Legal Music Sites that can Save Money, I began the conversion from CD to digital download about a year ago.

All of these conversions, both those in my past and those that I anticipated, caused me several years ago to stop buying most DVDs. I knew that my DVD viewing days were numbered. I just did not know when the end would come. Now I know that the end is coming.

I have watched my local video store (a prominent national chain) change its layout several times over the past few years. My video store now carries video games – a logical synergy with DVDs. About 20% of my local video store is given over to video games.

My local video store is also reorganizing its display racks because it is significantly increasing its sale of electronics. Moreover, by this time next year, the store’s clerks anticipate that they will have an equal number of Blue Ray discs as they do DVDs. My neighborhood video store clerks also told me that Video store is planning to eventually role out download stations in each of its stores.

This all spells the end of DVD to me. By Christmas of 2009, my local video store will be carrying DVDs in only 25 to 30% of its store. The rest will be Blue Ray, video games, electronics and maybe even download stations. Over time, I think it is inevitable that the space allocated to DVD will get smaller and smaller. Whether it is 2011 or 2012 or a bit later, I know that all of my DVDs will be nothing but useless clutter because I will have moved on to digitally downloaded movies. Or maybe I will finally get some sense, and stop buying or even renting movies in any format. With about 200 satellite TV channels, there must be something that I can find to watch on TV…

What do you think? Is it foolish to buy DVDs this holiday season? Are we about to see the end of DVD as a dominant entertainment media? Given the rapidity of technological change, is it ever a good idea to invest in a library of movies in any medium?