Netflix to raise prices for Blu-Ray (HD) subscribers.

[Mr. Tangent]

Netflix to raise prices for blu-ray subscribers.

This is crap. I love Netflix but I think a lot of people (myself perhaps) are going to jump ship if they do this.

I've been a member of Netflix since '03 but lately I've had a lot of movies shipped from other distro centers (which takes a LOT more time) and the annoying LONG WAIT times. Granted I do watch a lot of obscure titles but still. And now having to pay more for Blu-Ray is getting close to breaking the camel's back. Not to mention I STILL DO NOT HAVE Mac support for the Watch Now feature!

[Bruce]

Seems fair to me. Blu-Ray disks cost more (for now) and I haven't gone HD yet. Why should I bear the cost of keeping early adopters happy?

[Mort in Detroit]

I'll second that. Don't make me pay the price for the "gotta have it first/now" crowd.

[Baff]

I'll third that. Don't make me pay the price for the Watch Now crowd.

[Mr. Tangent]

I think the wholesale costs of Blu-Ray over DVD is nominal. By this very same logic, DVD prices have gone down since Netflix was created. Why weren't the prices of renting lowered to reflect this? I think the nominal difference between DVD and Blu-Ray is so low that Netflix should eat the difference.

[Pihk]

I think the nominal difference between DVD and Blu-Ray is so low that Netflix should eat the difference.

Source?

[Mr. Tangent]

Here.

[Pihk]

"The price might sound high, but when you realize these are the same prices for DVDs when they originally came out in the '90s, it's not a tough pill to swallow. Sony announced that wholesale catalog Blu-Ray titles will be $17.95, while new release titles come in higher at $23.45. Retail prices will clearly be higher once some retailer profit is built in to the model, but it's a safe bet that we won't see titles in the $30 and up range." (bold mine)

Those numbers are higher than most retail DVD prices for new releases. The disparity between these wholesale BluRay and retail DVD prices is even wider for catalog titles. And 2008 is the only relevant time to consider, not the 90s.

[Mr. Tangent]

The problem is that Netflix is trying to justify the expense of a one-time disc causing their business model to cost more, thus charging the customer more. Even if Blu-Ray costs more (albeit marginally) economies of scale kick in to recoup their cost. If they had to buy one disc per user I can imagine charging more. But they buy a certain set amount and this copy is seen by a magnitude larger amount of users (i.e., there is not a 1:1 disc to user ratio). Therefore even if Blu-Ray is a little higher the cost is not so great that they should -- or have to -- increase the cost to the consumer. Make sense?

Now if the cost of Blu-Ray were exponentially greater (than DVD) then I could agree, however, I think the cost increase is negligible therefore I think it unnecessary for Netflix to increase the cost for Blu-Ray subscribers.

To wit, not all DVDs are equally priced wholesale. Should there be a tier for the ones priced higher?

[Pihk]

You have an argument for critiquing the magnitude of the price increase, but not for the price increase itself. There is no logical reason to expect Netflix to make less profit on a Bluray user as they do on a reg DVD user.

To wit, not all DVDs are equally priced wholesale. Should there be a tier for the ones priced higher?

Since a typical user rents a range of movies, an average cost per title seems like the most practical way to move forward. Ditto for BluRay. And then since the avg BluRay is more expensive than the avg DVD and we're back to that being the reason for the price increase.

[whome]

Your logic is flawed.

If a "BluRay customer" got 100% of their movies in Blu-Ray, then your logic might hold.

But in practice, even a user with BluRay turned on in their profile only gets a small small fraction of their movies in BluRay. First, there are very few titles. Second, even the titles that they have are limited. So if you do as you suggest -- average cost per title -- the difference between a normal user and one who has BluRay turned on in their profile is negligible once you account for the fact that only 1 in 20 titles are available in BluRay.

I'm not complaining about lack of availability mind you. I'm happy to have Netflix slowly ramp up and it's ridiculous to expect them to all at once invest in doubling their inventory to get everything in BluRay. I just don't think its right to charge extra when the cost difference (your metric: average cost per title) is basically non-existent.

Moreover, can we guess what fraction of operating expenses for Netflix is acquisition? I guess it's a trade secret, but I'd be lots of $$$ that overhead [e.g., rent, electricity], labor, and postage all account for far more than buying new media. And none of that changes a bit between formats.

[Spindaddydad]

I just don't think its right to charge extra when the cost difference (your metric: average cost per title) is basically non-existent
But as they ramp up their BD catalog that cost difference begins to go up was well, so surely you believe that, at some point, they'd eventually need to raise the cost.

Moreover, can we guess what fraction of operating expenses for Netflix is acquisition?
interesting question. I would think postage is the highest cost. They pay it for every single movie that goes out, while the DVDs themselves are a one-time cost (albeit much higher). Labor probably second highest cost. But could be way off here.

[eviltimes]

It doesn't matter what the cost is, it is going to cost NF more for BD than SD. As such that cost should be charged to Blu Ray renters (a per disc surcharge added to your credit card), instead of spread out across the whole system.

If Blu was going to take over the system, instead of remaining a niche product (like Laser Discs during VHS days), then I would agree with you, let everybody absorb the price of the changeover. But it ain't gonna happen. SD is here to stay.