Wednesday, July 13, 2011

Netflix price discimination

Undoubtedly Netflix was losing money on its unlimited DVD by mail deal, selling the package below market costs to grow the company's customer base.
from the International Business Times

Netflix announced it was raising its prices for receiving DVD and using the streaming service by 60%. What Netflix appears to be doing (based on their blog) is trying to further price discriminate against those who want streaming movies and those who want mailed DVD. They have created a new DVD only plan, so they can further separate people with different preferences for DVDs or streaming movies. It was likely at first important to build customers so people can identify which type of person they are, I would have thought I would go more streaming, but my wife and I watch mostly DVDs due to the selection.

I'm also guessing that many Netflix customers myself included pay little attention to their bill. It's likely that many people won't change their plan, but by offering a low cost option for either streaming or DVDs they can maintain the thrifty people.

Hopefully, I'll remember to change my plan.
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