I just cancelled our Netflix instant streaming service because we have Amazon Prime which gives us streaming for free. Our main requirement is easy access to episodes of Pingu and Amazon carries these and also all the movies on my Netflix queue. No brainer. I wanted to switch to the DVD by mail service to get hold of all the movies that Amazon and Netflix streaming do not carry. But it turns out you can only add DVD by mail to your streaming service and cannot get it as a stand alone product. What is Netflix doing?

It seems Reed Hastings thinks streaming is the wave of the future and the DVD is old defunct technology, So, he wants to incentivize the switch (he even tried to spin off the DVD service as a separate business). But the range of movies Netflix streaming carries is not comprehensive. For example, I wanted to watch The Social Network but couldn’t find it in the streaming service. Then, my options are to drive to the video rental store or try to find it on HBO or pay per view. I prefer DVD by mail to those options. For instant streaming there is competition not only from Amazon Prime but an old streaming technology – TV! Plus there are lots of TV shows available for free in the On Demand options. Also, when had DVD by mail I would often leave the DVD sitting for weeks without watching it thereby guaranteeing Netflix a revenue stream with minimal impact on costs.

So, I think the old technology DVD has some legs yet. Movie studios like them because they have more control over pricing and can cut out the Comcast/Netflix middleman. And DVD by mail is Netflix’s most profitable business. So, while raising Netflix prices might have been a good idea with the decline of Blockbuster, the switch to streaming IMHO was not a good strategy. Maybe some Netflix insiders have a good rationalization for their strategy that I am missing?

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