Will Netflix reverse price hike? Outlook not good

Video-rental service doesn't appear ready to give any ground on new price hikes and competitors are now trying to benefit from controversy surrounding Netflix.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
3 min read
Blockbuster hasn't faded away. The company is trying to benefit from the controversy surrounding Netflix's price increase. Pictured is a shuttered Washington, D.C., Blockbuster store that once saw long lines but last year ceased operating. Greg Sandoval/CNET

Some Netflix customers are holding out hope that the Web's No. 1 rental service, will reverse a decision to raise prices, according to a CNET poll. Comments made last night by Netflix spokesman Steve Swasey, however, didn't sound encouraging.

"These are our prices," Swasey said when asked whether Netflix might change its mind or reduce the amount of the price increase.

An unknown number of Netflix subscribers have taken to the Web to bash the company for doing away with a hybrid price that covered the rental of streaming video and discs. Customers who used to pay $9.99 to rent one disc at a time as well as receive unlimited access to Netflix's streaming library must now pay separate fees for streaming as well as DVD rental. Each cost $7.99 and that means to acquire discs and Internet streaming, a subscriber must pay $15.98.

CNET's poll, as of this afternoon, showed that 55 percent of the more than 18,000 respondents indicated they would cancel their Netflix subscription if managers don't change their mind about the price increase by September 1, when the hike is due to go into effect.

While many customers are undoubtedly angry enough to cancel, it's hard to know for sure what percentage of Netflix's 23 million customers are actually complaining. It's hard to find anywhere online where there is more than tens of thousands of angry comments. Even if the number were in the hundreds of thousands, it would represent a small fraction of subscribers.

Of course, the people who actually take the time to call the company or complain on message boards may represent only a small percentage of customers who are outraged and are willing to give up on Netflix. Only Netflix's leaders know for sure how many of their customers are cancelling.

One way we might be able to judge the scope of the damage is if Netflix's competitors begin to see a spike in users. Some of Netflix's rivals are trying to entice unhappy Netflix subscribers.

Blockbuster, the company that once dominated video rentals in this country that has been whittled down in recent years into a Mini-Me version of itself, is trying to profit from the controversy dogging Netflix. The company announced today that it would provide any person who can prove he or she is a Netflix customer with a 30-day free trial of Blockbuster's most popular Total Access subscriptions.

Blockbuster said subscribers can rent video games and newly released DVDs nearly a month before they're available at Netflix and won't pay extra for Blu-ray titles. After the free trial concludes, those who stay will pay $9.99 to rent one disc at a time or $14.99 for two discs.

Here's the rub: Total Access subscribers don't receive access to streaming movies. Blockbuster still appears wedded to the brick-and-mortar strategy.

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After years of financial losses, store closures, and basically being trounced by Netflix, Blockbuster was acquired out of bankruptcy earlier this year by satellite TV company, Dish Network for $233 million.

Dish Network has a long way to go to bring Blockbuster back. To many consumers, Blockbuster is synonymous with the much-hated late fees, long lines, and inconvenient movie renting. Who wants to be required to drive a car before renting a movie anymore?

"I will agree that Blockbuster in the past has not always kept its eye on the customer," said Kevin Lewis, Blockbuster's Chief Marketing Officer, told CNET today. "But the company is still a widely known brand...We have much to do and we've learned a lot. Look what's happened in the last couple of months. We've lower our prices."

Blockbuster didn't pass up the opportunity to take a swipe at Netflix. The company said in a statement that it was "shocking" Netflix had raised prices by 60 percent in these hard economic times. Too bad the company wasn't as protective of consumers when it was banking $300 million a year from late fees.