Understanding Why Netflix Changed Pricing

Many journalists have offered their opinion on Netflix’s recent changes, its stock price decline, and their even more recent branding changes (Qwikster). Yet in each article, it appears as if the journalist all agree that the price move (creating separate prices for streaming and DVDs) was a bad strategic move. As an example, Techcrunch notes:

“Raising prices for those of us who opt for both streaming and DVDs would have been fine if Netflix had a deeper streaming catalogue. But the gap is still too big, and the price hike seemed premature. Your customers are extremely loyal. Don’t piss them off.”

The problem with this perspective is, in my opinion, the price move was not a “decision,” so much as a “reality” presented to Netflix from the content owners in Hollywood.

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