Netflix outage

By on June 29th, 2011 in netflix

Ironically, just as we changed our Netflix service from 3-discs-at-a-time to 1-at-a-time, intending to watch more Netflix streaming, the Netflix streaming service collapsed. We’re able to see our instant queue on the Roku box, but pressing the button to start a video running does nothing.

The service has been down a couple of days now, with no word on when it will be back. I called Netflix tech support Monday evening, thinking perhaps the problem was on our end but their automated attendant announced that they were experiencing streaming problems and working to fix them. I’ve no idea how widespread the problem is.

I like that Netflix keeps the cost of their streaming service low, but I think they’re keeping it too low. Hastings says that Netflix isn’t in competition with cable TV, which is a battle he knows he can’t win, at least for now. But people commonly pay $75/month or more for cable TV service, and Netflix charges only $8/month for streaming. I think they could bump that to $20/month or even $30/month without scaring the cable TV companies too badly, and without losing many subscribers. In fact, they’d probably gain subscribers, because that extra revenue would allow them to buy rights to a lot more streaming content.

With about 30 million subscribers, I suspect that at $30/month Netflix could buy streaming rights to nearly everything they now carry on DVD, with the possible exception of current seasons of a few popular TV shows. At close to a billion dollars a month in revenue, Netflix would become an 80o-pound gorilla. They’d have the clout to negotiate streaming rights for just about any content. Just as important, they’d have the clout to buy enough legislators and judges to prevent broadband companies from throttling their customers.

Eventually, Netflix could introduce tiers. For another $30/month, for example, Netflix could offer several channels of live sports, which is the Holy Grail for a streaming service. They’re also in an ideal position to offer pay-per-view events and first-run movies, and they could introduce a purchase option as well. I suspect all of this is on Hastings’ to-do list, and I suspect we’ll see the first signs of these new Netflix offerings by 2012.

I have no doubt that Hastings’ real goal is to become the content provider of choice, turning the cable companies into providers of dumb pipes. Hastings denies this, of course, because he’s still vulnerable to cable companies. But the cable companies are fully aware of the threat, and doing everything they can to nip it in the bud. I’m betting on Hastings.


7 Comments and discussion on "Netflix outage"

  1. Roy Harvey says:

    I think that Netflix would loose huge numbers of subscribers if they raised prices to $20 or $30. The psychological difference is profound! For $8 people don’t have to use it very much to justify it – it is low enough that many can dismiss the price altogether as not worth thinking about. At the higher prices you suggest there would be more hesitation to subscribe and, if money gets tight, less to unsubscribe. It would also be such a radical change that I expect customers to revolt in droves not because they can’t afford it or don’t think it is worth it but just because raising prices by 150% and more is simply not acceptable. They would go from being one of the highest-rated in customer satisfaction to being tarred-and-feathered in some virtual manner.

  2. BGrigg says:

    I cancelled Netflix in Canada. Nothing to watch. I tried for three months, and watched only second rate movies, all of which I had seen. Until they secure the rights to stream newer movies and shows in Canada, their service isn’t worth free.

    I would gladly pay $20 per month for access to the same list the US clients get.

    They did try to get me to come back by offering their service for only $7.99/mo. Woo-hoo! A savings of 12ยข per year!

  3. Robert Bruce Thompson says:

    How so? Very few Netflix customers sign up for streaming-only. The most popular plan by far is 3-discs-at-a-time for $20/month, the second most popular is 2-discs-at-a-time for $15/month, and the third is 4-discs-at-a-time for $28/month. More than a few people pay $56/month for 8-discs-at-a-time, and everything in between. I remember reading several months ago a breakout, but I can’t find it now. The totals were something like 70% of Netflix customers on the 3-disc plan, 15% on 2-disc, 5% on 4-disc, and 10% on all other plans combined, including streaming-only.

    I’ve been on the 3-discs-at-a-time plan for years, and until a few days ago I was happily paying $20/month for it. At any time, if Netflix had announced that they would no longer ship me DVDs, but everything they had on DVD was now available streaming for $20/month, I’d have been delighted. And I suspect nearly all of their other customers would have been as well.

    There’d be nothing preventing Netflix from keeping a cheap streaming-only plan for $8/month that didn’t have access to the more expensive/recent content. That way, Netflix wouldn’t be taking away that option for people on very tight budgets, but merely changing delivery method for mainstream customers.

    And the financials are compelling. Netflix would save a huge bundle on mailing costs and a smaller but still huge bundle on DVD purchase costs. Their cost to stream is probably a couple cents an hour for the pipe plus licensing costs, which are typically pretty trivial compared to mailing and DVD costs. And eventually all those shipping centers and their staffs would go away, saving still more money. We’d actually get a lot more content for our $20/month than we do now. And no waiting or hassling with mailing discs back and forth.

  4. bcl says:

    I too just dropped down to the 1 disc at a time. I realized that I had 3 discs sitting here unwatched for a month so there is no point in paying for more than one. I’d happily pay more for streaming though. I didn’t notice any problems here in WA with streaming over the last few days so it isn’t system-wide. Or maybe I’ve missed the problems with my West coast evening viewing.

  5. Roy Harvey says:

    You are not keeping up to date, but it is changing so quickly that it is almost impossible to keep up. The most popular plan is streaming-only – streaming has been exploding their customer base and the highest percentage of those new customers are streaming only, with the remainder weighted toward the single-disk end of the spectrum.

  6. Robert Bruce Thompson says:

    No, I haven’t been keeping up, but that makes sense. Again, Netflix could address this simply by offering two or more streaming tiers. The $8/month tier could remain as is, with the same type of content. The $20 or $25/month tier could include that plus all the stuff that’s currently available on DVD but not streaming. I’d pay for that tier in a heartbeat, as I suspect would most of the current streaming-only subscribers. Then they could add a third tier for folks who want current-season TV programs delayed 24 hours after first broadcast.

  7. bobruub says:

    I get netflix via a vpn (I’m in AU) and must say I’d be happy to get that content that is only on DVD streamed as well, mainly because I cant get then mailed to me ๐Ÿ™‚

    Those that I can’t see on netflix I usually get off itunes. (the US version not the crappy AU version)

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