It looks kind of screwy; 3 movies at a time is $16.99 a month but 8 movies at a time is $47.99 a month. After three movies, the average cost of a rental (see the link for the numbers) is either flat or rising. Why go for the 8 movies deal instead of setting up separate accounts and queues, thereby saving money? Why is Netflix encouraging everyone to do the 3 movies a month version of the plan? Why are there no quantity discounts past the 3 movies a month margin? (And, by the way, aren’t there still lower prices for newbies, at least for a while?)
I suspect this is one of those pricing models that traps a small number of overenthusiastic patrons into paying more, keep a few others away from overgorging on old Jackie Chan films and then quitting prematurely, and de facto gives most customers a pretty flat pricing structure. Transparency is sacrificed but does anyone really care?
The pointer is from Angus Hedrick.
postage is netflix’ primary cost. most of the 3-at-a-time customers are just letting the disks sit around unwatched for long period, lowering cost. the people signing up for the 8-at-a-time plan are more likely to watch or at least sample their disks aggressively and thus have a higher mailing rate.
8 out at a time is different than two accounts with 4 out at a time, and it actually better in most situations. If you just have a bunch of old movies you want to watch at some point, it doesn’t matter. But if you have multiple time dependencies between discs you want the 8 out rather than two 4 outs. For example, you might want to watch two anime series both with about 6 discs, interspersed, then after they are both done watch a specific movie. You can make this happen with the two queues, but it involves potentially modifying a queue after every movie return because of uncertainty about which discs you will watch and return first.
DK’s comments make sense. I think anyone who needs more than three movies out at one time is either retired, unemployed, housebound, or in prison. These would be expensive clients to service.
The consumer being able to rent 8 movies at a time is very expensive for NEt Flix to have upkeep on. They are paying postage to send out all of these movies, and if the person watches them and is able to return them in less than a week’s time is really cutting into the bottom line. Offering the plan for much more money over the 3 per time is a fair price to really stick it to the people who are overexcessive about watching movies. It’s apparent that NFLX is the top offerer of movies online with how their stock price has grown over the last 3.5 months. Them not doing brick and morter is the best thing that could happen for them. NFLX saw the times changing with high speed internet and said to themselves, “Lets offer movies through teh mail and over high speed internet connections so we don’t have to build drop off points for movies. Pur genious in my book!
Those of you who are pointing out that 8 is better are missing the point. The marginal cost for the 3 out system is lower than that for the 8 out system. Theoretically you could do 9 out for a lower marginal cost than the 8 out by setting up 3 accounts.
Perhaps this is a good question for the people who worked on Nudge.
Everyone needs to check their math. 3*17>48. 4*14>48. $17+30<48 but just barely. I haven’t worked through all the combinations and permuations but the Netflix plan isn’t screwy at all and offers no obvious way to game it.
As someone who was thinking about signing up for 4-plan and was put off by the marginal cost, I wonder as well.
It generally takes 3 to 4 days to receive a new DVD. If you return a movie the day after you receive it, you can watch 3 or 4 per week on the 3-plan. Bumping up to a fourth movie allows one to potentially watch 6 movies a week. You go from about 16 per month to about 24, a jump of 50%. Another way to consider it is that it costs $17/mo to watch about 16 movies, at $24 you can watch 24 movies (and probably more).
Second is inventory. I notice that the first disc of a TV series sometimes has a short wait. Either through frequent rental or people who hold discs a long time, Netflix would have to increase it’s inventory to keep wait times low.
My friends and I also wondered why there weren’t bulk discounts. We posited that it may be to stop us from doing exactly what we wanted to do — buy in bulk on one account and then split the movies.
Why are there no quantity discounts past the 3 movies a month margin?
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My friends and I also wondered why there weren’t bulk discounts.
Maybe because Netflix doesn’t WANT you to buy in bulk. Read this:
People that sign up to get 8 movies at once (at once!) probably are most likely to be the same people that watch and return moves extremely quickly, cutting into Netflix profits. They are probably most likely to be like one of my co-workers, who gets movies from Netflix, rips them to his computer and then immediately mails them back, so he can watch them later.
Those of you who are pointing out that 8 is better are missing the point. The marginal cost for the 3 out system is lower than that for the 8 out system. Theoretically you could do 9 out for a lower marginal cost than the 8 out by setting up 3 accounts.
Multiple queues may offer another solution to the problem of series; if you want a six disc series, and you’re very strict about getting them in order, then you really want your queue order observed. Disc 4 or season 3 may be pointless without disc 3 or season 2. However, others standalone discs you may be willing to skip further down your queue in order to get faster. Unless Netflix has more fine-grained queue management than it used to, multiple queues might be useful for the consumer; put a series on one queue while putting standalone requests on another.
Nobody has made this point yet:
I read that old-school video stores have taken to subscribing to Netflix so as better longtail their limited inventory. (“[Obscure Korean art-film]? Hmm. It’s out now, but we’ll have on Wednesday, Thursday at the latest.”)
The more expensive “bulk price” might be a cheaper way to deal with these re-renters (in the long run) than a lawsuit.
The most galling thing for Reed Hastings, though, wouldn’t be the re-renting per se, but that the re-renters would charge late fees!
Or, maybe it is. Perhaps they are subsidizing the cost of the 3fer to get their foot in your door. I can attest that once you go by mail, you don’t go back. Not having to go to the video store saved my marriage!
I think Bob Montgomery made an important point in all of this. We used to have a high-disc plan (can’t remember, I think 5 at a time) and it wasn’t worth it. You weren’t able to watch 66% more movies per month with that plan, compared to the 3-at-a-time plan, because they didn’t turn them around as quickly. At first I thought I was just being paranoid and cynical until I saw those news stories such as the one Montgomery linked to.
Perhaps behavioral economics can provide some insight. The “8 for $47.99 per month” plan may simply serve as an anchor that will get you to buy the “3 for $16.99 per month” plan because it looks cheap by comparison (a clever marketing trick). It’s like the example that Dan Ariely put forth in his book Predictably Irrational where The Economist offered “print only” and “print plus online service” for the exact same price. Who would buy the “print only” service when they could have the “print plus online” for not one cent more? No one – but it likely caused more people to buy subscriptions than would have otherwise. I’m not discounting any of the previously mentioned theories, I’m just offering up another explanation.
I have had the 8 disc plan for a couple of years. Understanding the per disc cost involved, I can certainly understand why it would be more economical to setup three separate accounts. However, information Netflix provides through their recommendation engine has value that should be considered. I have rated close to 2000 movies and have found the recommendations to be quite valuable. The time required to replicate my recommendations across three accounts is more valuable than the incremental cost of have the 8-disc plan vs 3 3-disc plans.
Blockbuster is better anyway. They have email customer support in addition to phone. With Netflix you can only phone them, which seems foolish being that they are a Web company.
it is so expensive so far
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