11/22/2010

Netflix Raises Prices, Hulu and Redbox Compete

Netflix has decided to raise their prices on various services they offer, and they have decided to being offering an internet streaming-only option. This is probably due to the increase in popularity of free online services such as Hulu. Hulu has recently added a new subscription based service called Hulu Plus which allows users to access to a great number of past seasons of TV shows and movies online. Redbox continues to increase in revenue and options - next year they will be adding an option to rent movies on the web.

With all the options, it will be interesting to see where the market settles with regards to price and which options will remain viable in regards to consumers desires. It will also be interesting to see which company's strategy will be the most successful. I personally utilize all three of these companies, depending on the viewing options available. It will also be interesting to see if any of them will go the way of Blockbuster, which has filed bankruptcy and continues to struggle to survive in the marketplace.

6 comments:

Alfred said...

It's interesting to see where this industry is going. I think the company that makes the movie-watching process the easiest stands to perform the best. It's not surprising that Netflix has embraced the internet and that Redbox plans to do the same next year. The internet is easier and faster to use than waiting for something to arrive in the mail. It's basically an instant service. The traditional brick and mortar movie store, such as Blockbuster, had significantly more overhead and could not produce the same services. As a result, it filed bankruptcy. The simplicity that the substitutes provided were too much for Blockbuster. The company that doesn't adapt well in the future is going to face a similar fate.

walla walla said...

In regards to price, I think it is safe to say that prices will continue to fall to the point where marginal costs are equal to marginal benefits. As these three organizations will offer similar services, I believe that the business which will do the best will be the one which diversifies itself the most by offering a wide array of packages and add-ons. For example, I foresee programs designed to capture as much producer surplus as possible with packages ranging from basic services to more expensive options.

Vladimir said...

Netflix needs to be careful if they are raising their prices and offering less options to customers. With other companies entering the market, Netflix must find a way compete on the same level without price increases. Also, I have heard that Netflix's streaming quality has been very poor for the most part. They must correct this problem or risk losing customers.
In this market, the company that offers the quickest and easiest way to watch movies in the best format will win over the most customer.

denver said...

We see more and more technological advancements these days. It is fun to watch the trends as they evolve, but you have to be careful not to let them pass you by. We see people buying into entertainment for the home more and more like Netflix, Hulu Plus and Redbox. The real gold mine seems to be the mobile arena, though. I can see companies like Netflix, Hulu and Redbox taking advantage of that.

I think that the companies that can piggy-back on mobile operating systems will come out conqueror. By consuming netbooks, ipads, smartphones and moving everything to the “cloud” we are demanding more portable data. I enjoy the benefits of Hulu every now and then but would definitely use it a lot more if I had it in my pocket all day.

We look at Facebook and how they are making their money by offering a free product. There are other good examples that we can use like Skype and Pandora that offer free services but have figured how to still make money. I am sure we will see something like this where we can access all of the movies and TV shows that we want right in the palm of our hand and do it with minimal costs.

If these companies don't innovate they will disappear.

Rhett said...

The news is in and it looks like Netflix strategy worked (http://www.bloomberg.com/news/2010-11-22/netflix-shares-surge-on-streaming-only-program-option-dvd-price-increase.html), at least the stream-only pricing option worked. Netflix seems to find a product that I'm sure Redbox will try and jump on soon. This service though doesn't cost Netflix very much compared to the DVD's sent out. That's the beauty of the Netflix pricing strategy is that they make more money on instant watching only than on the DVD's. If their is one firm who is going to prosper I think Netflix will be it. Hulu is doing great and I agree with Denver that there are free services that make a profit like Skype and I think Hulu will fit into that category as well.

Dave said...

I wonder if Netflix is doing this to help their consumers move out of DVD deliveries, rather than because of market pressure. Perhaps this is a strategic move to get their customers to shift into a product with lower marginal cost.