Families have been buzzing about the recent Netflix price increases and brand changes. We’ve talked about rebranding your company quite a few times before. When Starbucks changed its logo a few months back, the industry was keen on pointing out how the change might affect the company’s image. However, when Starbucks tweaked its logo, it did not tweak its brand message or brand experience. Netflix, on the other hand, is taking rebranding to a whole new level and many are extremely concerned about the consequences.
Netflix History
Netflix was established in 1997 in Los Gatos, California. Just a few short years after conception, Netflix begin offering subscription-based distribution, where consumers could pay a monthly fee for access to thousands of videos. By 2009, Netflix has over 100,000 titles and over 10 million subscribers and had obtained “first run rights” to films from Paramount Pictures, MGM, Lions Gates Entertainment, Sony Pictures, Walt Disney, and more. By 2011, Netflix had 24.6 million US subscribers.
The brand was clear; “Watch Instantly,” and it was extremely successful. Subscribers, all 24.6 million of them, could simply use their game consoles, computers, or internet-TV’s to stream videos directly to any medium. Gone were the days of going down to the video rental store to walk through aisles of videos. With Netflix, you simply get online, search for what you want, and download instantly. The brand was powerful with a simple message and an effective consumer experience.
For example; when you think of movie rentals today as opposed to ten years ago, you think Netflix and Redbox, you no longer think Hollywood Video or Blockbuster.
Netflix Price Increase
Back in August, Netflix announced that it would be increasing subscription prices for all customers by a substantial amount for those who wanted to continue renting videos via DVD and mail. Those who chose streaming their movies would continue to pay at the same rate. The nearly 60% price increase cost Netflix over 1 million subscribers, and severely tarnished their brand reputation.
Why did they do it? Here’s a very interesting take:
Speaking of profit, the goal for Netflix is making money, not shipping DVDs or streaming videos. Since they pounded Blockbuster, they have emerged as the leading source for movies and TV show reruns. And you can make a good case that they have been underpricing for some time. Streaming is the future, so Netflix is not interested in subsidizing the DVD business for $2/month on top of the streaming fee. If you want DVD’s, you need to pay $8/month at a minimum. This will allow them to actually make money on the DVD side of the business. Some people will probably quit and rent from kiosks like RedBox instead, but these are customers at the margins. Netflix probably has good data to estimate what portion of their subscribers are likely to leave for kiosk services. (Mimiran.com)
Unfortunately, for a brand that has been committed to an experience of affordability, ease of use and instant access, the price increases have not gone over well.