Netflix Defends Pricing Strategy

Yesterday, Netflix CEO Reed Hastings and CFO David Wells sent a letter to shareholders defending the company's pricing strategy and assuring them that it is a good long-term strategy.

The letter reads:  "Two months ago we took a big strategic step by separating streaming and DVD-by-mail into two distinct services, and we now have more visibility into our expected Q3 2011 results. Our financial guidance for the quarter is unchanged, as is our international subscriber guidance. We are, however, lowering our domestic subscriber estimates.

"Despite the guidance revision, we remain convinced that the splitting of our services was the right long-term strategic choice. The strategy behind the split of our services is four-fold:

to create a dedicated DVD rental division that takes pride in great execution and maximizes the opportunity for disc rental over the coming decade;

to enable us to improve our global streaming service even more rapidly, because it is not meshed with a domestic DVD business;

to enable us, with the growth in revenue, to license more streaming content and thereby improve our streaming service even more;

to remain very price aggressive, with $7.99 per month for unlimited streaming of a huge library of TV shows and movies, and $7.99 per month for unlimited DVD rentals, 1 out at-a-time.

Comments (5) for "Netflix Defends Pricing Strategy"

Just unsubscribed from Netflix today. I tried streaming-only for half a month but the selection is a joke. Netflix can sugar coat this any way they want by implying that this change is good for the subscribers, but what it comes down to is a 60% price increase is pure GREED. Nobody likes a greedy corporation, especially one who insults their customers.

http://lostnapkins.blogspot.com/2010/09/netflix-ceo-reed-hastings-insults-his.html

Posted by jim on Friday, September 16, 2011 @ 02:34 PM

I\'ll keep the streaming. $8 for \"unlimited \" one at at time/month is ridiculous. I\'ll drop a buck on red box for the most recent. Break even for the both of us.

Posted by rdmsacto on Friday, September 16, 2011 @ 04:38 PM

The streaming is good, I like it. I\'ll just keep the other $8 bucks for Red Box.

Posted by rdmsacto on Friday, September 16, 2011 @ 04:50 PM

I also cancelled my subscription last night. I can\'t justify the increase with the poor streaming content. I\'ll pay a bit higher to have a better selection but this isn\'t it.

Posted by Johnny on Friday, September 16, 2011 @ 05:30 PM

Hmmm....let\'s see...split the DVD and streaming business into two units, same pricing, and \"forecasted\" better service...in the future! Not sure where the value-add is....currently. I think netflix could use some marketing assistance....esp pricing strategy. Go to Professional Pricing Society where you will find the core of us true pricing professionals. Just trying to help. :-)

Posted by Peter on Monday, September 19, 2011 @ 09:08 AM