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Undersecretary Barbara AnthonyPosted by:
Barbara Anthony, Undersecretary of the Office of Consumer Affairs and Business Regulation



Netflix_4C_White_Logo  Netflix, which offers consumers DVDs mailed to their home or instantly streamed through a wide number of devices, offers subscribers so much variety that sometimes choosing what to watch can be a hard choice. But the company announced yesterday a new choice that will be particularly difficult and one to which consumers should pay attention.

The company has been offering a flat-fee plan to consumers that includes DVDs mailed to the house plus access to its instant streaming catalogue. The new plan, however, splits those offerings into two separate plans, and does not offer a discount for both plans.

For example, a current plan that includes Blu-ray disc access and unlimited streaming is currently $11.99 a month (including an additional charge for Blu-ray discs). That plan would become two plans, starting on or after Sept. 1: A $7.99 per month streaming plan, and a $9.99 a month DVD-by-mail plan. That would be $17.98 per month, a 50 percent increase from the current membership.

So, consumers face something of a choice. They can pay a steep increase in their monthly fee – in the above example an additional $72 a year – or they can reduce services. That reduction, however, is a difficult one for consumers. While instant streaming offers incredible convenience through a number of platforms, the library offers significantly less depth than the hard-copy DVD library. The DVD-by-mail option, however, does not allow the same freedom as the instant streaming option. Already, consumers are voicing displeasure at having to make a choice.

Netflix is the dominant entity in the market, but others – like Hulu and Amazon – have been mounting challenges. How they react to the news – and whether they can pull market share away from Netflix as consumers review their options – will be interesting to see in the long run.

In the short-term, consumers should review their Netflix and decide how to proceed. The company’s emailed note to subscribers make clear that by doing nothing, the subscriber will be put into the dual plan with both services – essentially agreeing to a steep price increase. Consumers should decide how they want their plan to be managed going forward, and they should keep an eye out on the competition and see if they find an offering that they feel is better suited to their needs.

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