The increase was inevitable. When they started streaming movies in 2008, nobody realized how big the practice would become. Now its huge and studios realize that they are losing money by charging so little. Contracts with Netflix expire in 2008 and the studios now want their cut. It is estimated that this expense will go from millions to billions.
Netflix has always been a low cost, high profit business. Their convenience rapidly built their customer base. Even my backwoods neighbors get the red envelope at least once a week. My wealthier friends have "that box" that lets you rent them right from home.
Is a $6 price increase really going to affect them? That is the question stock watchers are pondering.
On the one hand, since the announcement, their stock price has increased several dollars. They have loyalty. The majority of consumers will grumble but not take the effort to make a change for a mere $6. That is human behavior.
On the other hand, competitors like Google and Amazon - who have much more money because of their diversified companies - may be eyeballing Netflix. There is room for a giant company to move in on competition in the same business, paying studios more and charging less for a year before bringing prices back up? Walmart does this all the time. Or, Netflix could be purchased by one of them. Their established client base is a valuable asset. And an acquired company's stock increases once the deal is done.
Then again, if they are just priced out of the market, Netflix could die a quick death and stocks could plummet.
Which way will it go? Any ideas from commenters?
We watch a LOT of movies, both at home and in the theater. The price of one month of the streaming/DVD doesn't even cover the movie tickets for both my husband and me - so we still think NetFlix is cheap. And....we can pop a whole bucket of popcorn at home for about 40 cents instead of the $7 that the theater charges. Well, that's without butter. I'll be interested to see how it turns as well. . .
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