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On Netflix

[ 54 ] July 20, 2011 |

The Netflix price spike annoys me as much as everyone else. I don’t mind paying for my films, and indeed I do, but the combination of the on-demand and mail services is extraordinarily annoying. Jim Emerson gets at some of the key issues:

The more serious problem is that too many of the movies themselves (even the good ones) are being made available in lousy prints: not just shabby public-domain versions (the equivalent of the old 16 mm local TV station prints that used to circulate through low-end nontheatrical distributors), but films shown in the wrong aspect ratio (beware of anything with the Starz logo on it) or even obsolete pan-and-scan (shame on you, Warner Bros.). What good is streaming delivery if you have to watch a digital mastering job that looks like it was done in 1986? I thought these battles were fought (and won) long ago, in the VHS and early DVD era. Surely the dominance of 16:9 HDTVs has accustomed mainstream movie and television watchers to the previously foreign concept of widescreen and “letterboxing.” (Now some people actually distort their TV picture on purpose — grotesquely stretching 4:3 images just so they’ll fill up the whole screen horizontally. Oy!)

A recent anamorphic widescreen (2.35:1) movie like “Let Me In” shown in “full screen” (16:9)? Not acceptable. Albert Brooks’ “Lost in America” (1.85:1) in 4:3? Outrage! (Actually, that particular movie doesn’t look so bad, but why crop it? The Amazon $2.99 Instant Video 48-hour rental is in the right ratio.) And the mangled movies aren’t even labeled, the way they would be if they were axed for television or DVD: “This film has been modified from its original version: it has been formatted to fit your screen.” (Although, that too is bull: Parts of the picture have been cut off so that the smaller image gives the illusion of looking bigger. Properly presented letterboxed or windowboxed movies “fit your screen” just fine.)

On top of this is the fact that the large majority of movies are not available online. Sometimes the streaming isn’t great either, but that will likely improve over time. But if you can’t get your movies online, however possible, you are going to lose customers to better services if you charge this much.

Netflix was originally a site that appealed to cinephiles like myself. I became a subscriber fairy early in the company’s history But as they quickly dominated the market, they became the Wal-Mart of film. They kept prices low in order to undermine Blockbuster and other physical videos stores. Once those are gone, they jack up the prices. A classic capitalist move I suppose.

Except that the quality is not there to justify this move. Without a more integrated film library between the DVDs and on-demand, it just doesn’t make sense to do this. In addition, there are too many other options for people for the company to treat its customers like this. Netflix seems to assume that while it could lose customers like me, the average person who thinks Date Night is going to be awesome is there’s. But the arrival of Red Box is a real threat for Netflix on this front.

For people like me, Netflix’s appeal has lessened. What Netflix doesn’t seem to understand is that is the base of their business is not that hard to replicate today–using the internet for convenience. Two very real alternatives for cinephiles are GreenCine and, increasingly, Mubi. GreenCine operates very much like Netflix but with better movies. About the same price with a pay by the film online service for some. Mubi is a growing site that is all on-demand and pay by the film. It has some really great and obscure stuff. For all of you who want to watch the entire Chris Marker catalog, as I do, it’s gold.

The other issue here transcends film and gets to the problems of rejuvenating the economy. Netflix wants everyone to drop their mail subscriptions so they can lay off thousands of employees and increase profits. So long as the government encourages companies to lay off everyone possible to maximize profits at the top or to move every single possible job overseas, this economy almost cannot recover. People have to work somewhere. We don’t value work, employees are seen as expendable, and there isn’t any entity picking up the slack.

Edward Copeland has a powerful indictment of Netflix as well.

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  1. Scott de B. says:

    I think this is wrong. Netflix has to pay fees to the distributors for each customer who has streaming service, regardless of whether that customer streams or not. As those fees go up, it makes less sense for Netflix to lose money paying fees for customers who don’t use the service.

    It seems to me an a la carte approach where the customer decides which services she wants and pays for is preferable all around to one in which you are forced to purchase a bundle, parts of which you rarely use.

    • actor212 says:

      Netflix used to have a really good concept: you get one hour of streaming each month for each dollar you paid in DVD subscriptions: if you had the $16.99 plan, you got 17 hours a month.

      And then iTunes hit and showed that streaming models would have to get cheaper, particularly for television programming.

  2. shah8 says:

    Jim Emerson has obviously not been in the early HDTV world. We’ve had had running battles with the suits about the *expletive* aspect ratios. And given that some of us, unlike me, have *real* cash and influence, we’ve actually managed to make people far more sensitive about broadcasting bad aspect ratios. At least for awhile. Now that your average grunt Joe has an HDTV, he probably wants that screen *filled*!

    Starz is thoroughly notorious for horrid crop-jobs. If you are concerned about cropping, check IMDB to see if it’s anamorphic or super35. You can save yourself from the crop and zoom worst nightmare by doing that…If it’s anamorphic, and they’re showing it in 16:9, then you should turn off the screen…NOW. Super35 films are often just opened up, and many directors “protect” these margins so that we don’t see anything really funny, like boom-mikes. We *do* see poorer cinematography, though.

  3. shah8 says:

    hmmm, I think I should be clearer about this.

    Only the cinemaphiles really care about great picture quality and great selection and great whatever. There always has been, and always will be mudfolks who measure value by really irrelevant metrics, like whether all of the screen is taken up by the movie–and if a movie does not, then they really *will* call the broadcaster and complain! Netflix is shifting towards catering to the mudfolks. That is just OK. Just like me seeing ever more discussions on Harry Potter, and hoping that these people actually will be more inclined to read more challenging speculative fiction that blows minds and sparks incisive commentary…

    Sometimes it’s enough to educate rubes that you want the original aspect ratio, because it looks better and helps the story. Usually it’s not. Let Neflix go their way and entertain the mob, and you go your way and purchase the services from businesses that are crafted to satisfying your desires (as I see you do already). There just isn’t any need to complain (been at this for almost 10! years now) and no hope that complaining to servers will work. Only public education to people who give a damn would work.

    • dave3544 says:

      I won’t claim to speak for all the mudfolks (seriously?), rubes, and mobbites, but I watch a lot of 4:3 stretched out across my widescreen because I’m too fucking lazy to pick up the remote to change the aspect.

      Oh, and I don’t care. Mostly because 90% of the time I’m watching tv to have a distraction from whatever might be going on in my life, not to have my mind blown or my commentary sparked. I know, I know, what a fucking miserable way to go through life, right? I’m not entirely sure why we mudfolk just don’t blow our miserable brains out of our miserable heads for all the use we’re putting them to.

      • shah8 says:

        And I don’t have problem with that. You do what you want, and glory be with you!

        But my extra dollop of sarcasm is for people who impact other people’s ability to watch a movie in the original aspect ratio. They don’t leave everything zoomed on their tv. If it doesn’t fill the screen, they call their cable companies.

        Some people’s hobbies are other people’s distractions. No way around that, but we can do better…

    • soullite says:

      I tend to stay away from people that use terms like ‘mudfolks’. They are either racist or so classist that they may as well be racist. Given your name, I’d imagine the latter.

  4. UncommonSense says:

    The streaming service began as a value-added extra for the DVD subscription service. It made sense then. The selections were limited, but I considered it a bonus in addition to the two-out DVD package I was paying for.

    The mistake the company made was in trying to make the streaming service its core business before locking up agreements to stream everything. With the DVD service, I can watch what I want. With the streaming service, I can watch what is offered. That’s the main difference, and the main flaw with the streaming model.

    The great thing about the DVD service in the early days was the advantage over the wretched Blockbuster, with its anemic selections and vile late fees. Yes, there are often long waits for new releases with Netflix, but it’s manageable, and the convenience of not having to drive to the video store just can’t be beat.

    The company seems to have simply made a classic business error, which is losing sight of its main value proposition.

    • Kurzleg says:

      This. I’ve streamed a few films on Netflix and was sometimes surprised to find obscure films (“Bronson,” for instance) available for streaming. But generally the streaming selection is narrow and just OK.

      What didn’t impress me was the poor video quality of the streams, although I admit that my expectations were basically met as were already low. Not all their fault, as I’m a DSL user. Still, until video quality is better and the selection improves greatly, I can’t see myself going stream-only any time soon.

      • UncommonSense says:

        Yes, the quality of streaming is an issue. I have cable broadband, and video quality is still a problem sometimes, in addition to the random moments where it stops playing and starts buffering. That on top of the limited offerings makes it unwise for Netflix to focus on streaming as its core business model.

  5. actor212 says:

    It’s not just that Netflix got itself screwy, it’s also being screwed by studios. Sony, for example, has it’s own on-demand streaming service for its library (think it’s called Qrocity) that was hacked by Anonymous along with the Playstation hack. That stream, designed specifically for Sony HDTV’s with internet access, even had some first run films (I remember seeing Salt on it just weeks after it opened). Starz is about the only pay service that will let Netflix anywhere near its library, HBO has some weird “two years unless we decide different” arrangement.

    Heck, AMC may be the only original programmer that gets shows to you quickly, come to think of it.

  6. Chuchundra says:

    It’s pretty ridiculous to blame Netflix for this. It’s analogous to getting angry at your grocery store for the poor quality of Wonder Bread or the rising cost of pork.

    The Netflix streaming option has been, up to this point at least, been a money loser for the company. They simply added the service on to your subscription at no additional charge. While it’s understandable that people might be unhappy that they now have to pay for it, it seems churlish to get all angry at Netflix now that the free ride is over.

    The poor quality of a lot of the films in the Netflix streaming library is an artifact of the end-around they had to take to get any films on their service at all. The studios refused to sell Netflix the rights to stream their films, so they had to cut deals with Starz and the like, piggybacking off their studio deals. They didn’t have to right to re-master or re-digitize those films. They had to take what they got, so they got a lot of junky movies.

    • Kurzleg says:

      And now they want to charge for those junky movies. But that’s not their fault? I don’t get the sense that Erik is blaming them as much as he and Emerson are pointing out some of the reasons this is such a bad business decision for them.

      • Erik Loomis says:

        Right–I’m blaming them for drastically raising prices for an inadequate product. But mostly, I am saying that it is a very poor business decision. We’ll see how it all shakes out. Could be that they do fine. Could be catastrophic. And I know they are getting squeezed by the film companies. But if they are going to raise the price by 60%, how about a 60% improvement in the available films online?

        • shah8 says:

          On the whole, I don’t think Netflix *has* any options other than bad plans. Not only are they squeezed by media-rights owners, they are also getting squeezed by ISP deliverers finally walling off their garders. Content from AT&T doesn’t count against your bandwidth cap. Content from Netflix does, and the DSL cap is 150gb, which is low enough such that moderate Netflix streaming could cramp you.

          In the future, I think many home theater releases will only be done via streaming, with full copy-control through the whole path. I also think that future is dim because I think the decline in spending power is going to wind up being a serious threat to cable/media providers who can’t get business from the cash-rich corporations.

          • Bart says:

            We live in a rural area and have a medium speed wireless connection from a tower on the Blue Ridge, which rules out streaming. We very much like their mail service.

        • actor212 says:

          Do we know it will continue to be a crappy product, tho?

          • Chris says:

            We do know that without a cost increase, it isn’t going to get any better! Not when the streaming doesn’t make money, and the distributor fees are about to go from the millions to the billions. I’m not saying it will improve, but a price increase is a necessary condition for it improving, even if not a sufficient one.

            Also, I suspect that the risk for further price increases over the next 18 months will be pretty high, unless Netflix manages to pull off a miracle in negotiating with distributors (and since distributors have other options now, that seems highly unlikely).

        • L2P says:

          I’m not sure, other than being unhappy about the higher prices, where the complaints are coming from. For downloading, unless other services have drastically changed in the last week or so none of them offer what Netflix does. They have over 10,000 titles; even Amazon only has about half that, and under the new pricing scheme you’re paying like a $1.50 more per month.

          If you want to pay per download, go for it – but those services don’t compete with Netflix. Netflix lets you download a ton of entertaining stuff. Most people are more like me; the could give a crap if artsy 80′s art movies are available. I think Netflix can afford to lose every single cinefile on the planet and not see its bottom line change much. I’d bet most other people (after they’re done bitching) will keep on paying; there’s not really anywhere else to go.

          • Erik Loomis says:

            To be clear–I’m unhappy not about higher prices per se, but a) higher prices for a poor service and b) higher prices to try and move people to the on-demand service in order that it can lay off its warehouse employees. Regardless of the employment issue, if Netflix invests the money into more films that are shown in proper ratio and from quality prints, then there might be something to it. But it’s highly unclear if the consumer will see any benefit out of this.

            • Chuchundra says:

              I appreciate your concern for the Netflix warehouse employees, but their jobs are going away sooner or later no matter what.

              Netflix’s core business, mailing plastic discs with bits pressed into them, is one with a limited shelf life. I don’t know how long it will last, but I’d put the over/under at about ten years. Eventually the big movie studios will get their acts together and settle on agreements to allow third parties to just ship the end users the bits without the plastic disk.

              Then the Netflix disk mailing business just melts away, like a Snow Cone in a summer rain.

            • Richard Hershberger says:

              I understand your complaint, but I also took a look at the purported alternatives to Netflix. Most of them seem quite grim. Red Box? Really? Red Box is filling the old Blockbuster niche: great if you want this week’s new release, but otherwise worthless.

              The only one which seems at all viable is GreenCine. Its three disk plan is two dollars less than the new higher priced Netflix three disks plus streaming plan. So the available arguments, it seems to me, is either that GreenCine’s selection is significantly better than Netflix’s, or that the streaming option is worth less than two dollars a month.

              I ran through some of the more obscure films I’ve been looking for. GreenCine does have some, e.g. Lagaan, a Bollywood film about cricket. On the other hand, there are some titles they don’t have, which Netflix does. GreenCine seems to have a spotty selection of Doctor Who, while Netflix is thorough about them, with many also available for streaming. It looks to me like the two are roughly equal on selection.

              Anyone who does not use the Netflix streaming at all would be justified in concluding it is not worth two dollars to them and switching.

              The streaming option on Netflix clearly isn’t ready to be the sole, or even main, medium. The selection is good enough for someone who wants something to watch, but isn’t looking for any specific title, but is inadequate for those who are. But the price isn’t the issue. As for the warehouse workers, I agree with Chuchundra. That business model is going to go away, whether by Netflix phasing it out or by Netflix being ploughed under by some other corporation.

      • Aaron says:

        Erik is obviously blaming them rather than merely pointing out the problems in the business decision. I’d say that now it’s incumbent upon him to give some kind of moral framework in which that makes sense (that’s not to say it can’t be done, but it’s very far outside liberal conceptions of justice).

      • Chuchundra says:

        Well, there’s plenty of non-junky stuff on Netflix streaming. We used to watch Doctor Who and other TV shows back when we had it. And even the junky movies can be worth watching if you’ve got nothing else you want to watch.

        The bottom line is, if they don’t start charging for streaming, then they will have to stop streaming completely. Eight bucks a month isn’t a lot of money for most people. If the service isn’t worth that to you, then it’s probably not worth much at all.

        But they’ve split the streaming service off from their DVD service, so if you’re not willing to pay eight bucks for it, you don’t have to. Stick to getting DVDs in the mail.

  7. wsn says:

    Netflix didn’t do this just to gouge their customers. They had 2 problems, short and long term. The short term problem was the accounting of their streaming customers. Several of their streaming rights contracts had a clause where the rights would terminate once Netflix reached a certain threshold of customers. Cutting down that number by separating the plans helps them keep their streaming rights in the short term.

    The medium term problem is that the studios are increasing their prices for the streaming rights. I’m not sure what Netflix was supposed to do about that.

    This wasn’t a great business decision, but it may have the least bad option available to them.

    • Richard says:

      Dont confuse Erik with the facts. He’d much rather attribute every business decision to stupidity combined with a conscious desire to put people out of work.

      • wsn says:

        1) Nothing I said above precludes Netflix from making or having made stupid business decisions.

        2) A presumption that corporations would be happy to lay people off reduce operating expenses seems reasonable enough to me.

        • Richard says:

          But with the facts in mind, it appears that what Netflix did was choose the least bad option. That doesn’t appear to be the stupid choice.

          With regard to laying people off, I don’t think Netflix prefers to go to an online streaming mode only (and thereby laying off the people who now stuff the DVDs into those envelopes) but as other people have said on this thread, online streaming seems to be the wave of the future and sending DVDs to your house is not a long term viable business model. IF Netflixe had its druthers, I’m pretty sure they would like to continue as the guys who dominate the market by sending discs to homes but if they stayed with that model, they would go out of business within ten years.

  8. hickes01 says:

    Another issue with the streaming service is that your local cable company may decide to “throttle” hi-band users. I’m a Network Engineer and a Comcast (ugh) subscriber and I’ve noticed my cable service gets a bit choppy after I stream a few movies. I suspect Comcast has a usage meter and “throttles” me whenever they see a spike in usage. I can’t prove it, but just because I’m paranoid doesn’t mean it isn’t true.

  9. Aaron says:

    This is ridiculous. First, you can’t consistently assert that Netflix is gouging their customers (by taking advantage of market power) in a non-competitive market while at the same time claiming they’ll lose all their customers because alternative services are competitive. Second, if they were taking advantage of a privileged position in the market, or they were providing a good with lots of important social ramifications (pharmaceuticals, say), I might have some sympathy. But this is a movie rental business.

    If you don’t like the new prices, don’t pay the new prices. If you don’t like the quality, go to a new service. All I here is “I will continue using Netflix because it’s still worth my while to give them money but now it is slightly less so than before so I am ANGRY,” in which case, I have no sympathy whatsoever.

    • soullite says:

      They aren’t ‘gouging’ anyone. This would actually be an awesome deal if it weren’t for the factors the quoted post mentions: poor quality and extremely limited selection.

      If they just offered everything, I’d even be willing to pay a little more than they are demanding.

      • Aaron says:

        The point is that if it’s NOT gouging (i.e. not taking advantage of some feature of a non-competitive market such as market power) they should be allowed to charge what they think their service is worth. If you think the service is crappy and has quality issues, great. Don’t pay for it.

      • Richard says:

        But they dont have the option of offering everything – because the studios who own the films- wont give them streaming rights – and the quality of the streaming films is also limited because they don’t have access to the studio prints or the Criterion editions.

    • I just may be terminating my Netflix subscription. The streaming service, when it streams adequately, has a poor selection of movies for adults. My six-year-old likes some of the kid shows, but even she finds little she wants to watch.

      I understand the problems Netflix faces, and don’t think they have an easy path forward. If this works, they’re geniuses. If not, they have problems. But from my perspective as a customer I would have liked to see a streaming service that was of a caliber that justified the increased cost, rather than being asked to pay for the possibility that it may eventually be better.

      Some of the compromises they’ve made on the DVD side make that side of the subscription less desirable. And with the many other options for viewing and streaming content, I can’t help but think the cost-benefit analysis weighs against the new subscription plans, at least for my family.

  10. hickes01 says:

    PS– Loved the “Lost in America Reference”.

    “I’ve seen the future, it’s a bald man from New York!”. How true. How true.

  11. Popeye says:

    Netflix used to offer the 1-DVD-at-a-time plan for $8/month. Then they added unlimited streaming for $2/month. Now they’ve unbundled the DVD and streaming plans and each are $8/month.

    Basically because people still like the DVD plans, they were undercharging for the streaming. You can “indict” them all you want and maybe switch to a plan to pay $5/movie for streaming, but that seems unlikely to save you money in the long run.

  12. soullite says:

    I’d pay it if they had good stuff, but it’s like this guy says, I’m not paying extra so I can watch two-decades old British television shows.

    I mean, Coupling was hilarious and Red Dwarf was awesome, but even if you throw on Blackadder, it isn’t worth it.

  13. quickly says:

    all of these complaints and no one mentioned the loss of the entire criterion catalogue to hulu?

  14. mark says:

    I tried GreenCine for a while. It was a bit of a crapshoot what you’d get next–the top five movies on your list might not be available so they’d send you the sixth. Once the excitement of the lottery-like environment wore off, it got annoying. Don’t know if it’s better now.

    With Netflix I can mail in a movie on Wednesday and know exactly what I’ll have for the weekend.

    To be sure, I also had to admit that I am a dilettante when it comes to movies–my tastes just aren’t *that* far from the mainstream. And even I find huge gaps on Netflix’s catalogue (not just streaming), especially with older movies.

  15. Joe says:

    The alternatives don’t seem on the whole to fill the services Netflix provides.

    $8 for unlimited streaming is pretty good. I watched the whole first season of Friday Night Lights that way among other things. For $16, I can get this PLUS one discs sent to me at a time. This amounts to around 6-8 envelopes a month, depending on how quickly I watch them.

    I used to pay a few dollars to get ONE tape or DVD at the video store. The price increase is a bit annoying, given that is the price of one movie ticket and something at the concession stand, it isn’t really that bad.

    And, they keep on offering me free months. I use a different email address and I’m like on my third by now.

  16. Jay Schiavone says:

    “the streaming isn’t great either, but that will likely improve over time”
    Is someone building a new network? The telecoms have a clear disincentive to improving throughput, mainly because of outfits like Netflix. Only regulation will increase bandwidth and the telecoms buy legislation by the yard. Maybe mail is the way to go.

  17. actor212 says:

    Erik,

    A coda: Apple is in talks to buy Hulu.

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  19. Popeye says:

    Right, and it costs $4-5/movie.

    Netflix used to cost $2/month for unlimited streaming, and now that costs $8/month.

    Oh the outrage.

  20. actor212 says:

    You mean shop at Wal-Mart?????

  21. actor212 says:

    OK, that entire thread disintegrated and suddenly I look like an idiot for replying to a comment about Vudu that’s missing.

    Not that I needed help looking like an idiot but it’s sort of a DIY project for me and I don’t need the help.

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