The Netflix price hike for streaming-plus-DVD service goes into effect today for existing customers. For many consumers, Netflix just became a less compelling bargain even if Wall Street is loving this +60% gouging. The company abandoned its cheapo $9.99 a month plan that enabled subscribers to watch unlimited video streams and also have one DVD out at a time sent via mail. Interesting how the share price isn’t factoring in how badly Netflix underestimated the consumer backlash manifested by confusion and anger that followed the price hike. Guesstimates are Netflix could lose 2.5 million subs, including those most profitable customers who pay the monthly fee for DVD rentals but don’t bother to order many discs. Subscribers could bail to rent DVDs from Redbox’s $1-a-night kiosks or even rival Blockbuster which pounced on the Netflix PR problem to launch a nationwide promotion for existing Netflix customers who switch before September 15th. But the sad truth is that Netflix will probably come out ahead: the company makes a much higher profit from streaming than it does from DVD rental, and analysts have concluded that “a very high number of subs” would have to exit Netflix to offset the pricing increase.
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