The Netflix Price Increase Is Exactly What It Should Be--Not Much

We’re in the heart of the May sweeps and all this week the broadcast networks are announcing their new fall schedules, and it seems this year more than any before it, it seems like such a fond ritual signifying...nothing much.

There doesn’t seem to be any overriding excitement over May cliffhangers on broadcast TV, and a first look at NBC’s  new schedule for the fall released this morning reads a lot like all the rest.

Once, when David Letterman was still on NBC, he participated in a video piece in which he read the screaming headline, “NBC Cancels ‘Manimal’ “ with the subhead “Will Put on ‘Something Better.” He then had to break the news to his son, apparently the only known “Manimal” fan, and after a long walk in which dad explained how TV works, they arrived back home where dad reassured his now calmed-down kid, “Next year will be the best season ever.”  I loved the sketch for its goofy optimism in the face of inevitable mediocrity.  



It’s a strange thing, but online content marketers have something like the same kind of confidence in the near future. It’s not exactly astonishing, but it is somewhat jarring to witness the almost universal approval of Netflix and the ascension of “House of Cards” into something like the Online Video Hall of Fame.

Don’t get me wrong. Netflix is a worthy service and “House of Cards,” at least in the first season, was pretty good television-like content. (Frankly, by season two I concluded that most people in Washington apparently required multiple stab wounds in the back to realize Francis and/or Claire were destroying them. Surely, I thought, only voters are so gullible.)  

Netflix may in fact be this era’s HBO, but it’s not there, or anywhere near there, yet. It seems more to be the promise of something big combined with some fond wish to get away from cable. Fans like it for what it might become. 

Mostly, this trait is attributed to millennials, but I don’t know. There are millions of older viewers who have had decades, not just years, of over-paying for what the Comcasts, Time Warners and Cablevisions of the world call “service.”

When Netflix raised its prices last week, it did so nearly penitently. It only raised prices $1 a month to new subscribers, and held off raising rates to current subscribers for a couple years. That price increase was so slight, and so polite that who could complain?

Well, this is America. Somebody always complains. Motley Fool, emphasis on the Fool most of the time, sniffed: “Most would gladly pay a buck or two more to keep the content going. This is a true economy of scale where the service gets better as its subscriber base grows.” 

It concluded that, “it's a bummer to see Netflix wimp out after teasing shareholders by throwing out that $9.99 price before settling for the lowest point to satisfy eventual subscribers.”

Contrast that with your cable provider, which seem to raise rates either in total silence or by creating a three-card monte of service options. And did you ever see cable reward long time subscribers with a rate "hold"?

It is difficult for customers to find value--or more precisely, incremental value--in content, I think Netflix has discovered. It can let cable do a lot of its work by continuing to alienate consumers, and at that, the cable business continues to do the kind of job that would make the old Bell monopolists envious.

In the meantime, Netflix seems to make few boasts of its own, beyond some Reed Hastings barbs thrown toward HBO. Still, it is not the place that promises, or delivers “the best season ever” at this point. Nor does it have any reason to price itself that way.
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