What The Netflix Rate Hike Really Means

Take a deep breath and smell that acrid air, my friends. No, it's not the wildfires burning out west this season, but the stench of fuming Netflix customers as they cancel their subsciptions in droves following the announcement Tuesday of a startling 60% rate hike for the company's popular streaming/DVD combo plan.

Prior to the announcement, $10 a month bought unlimited streaming from the Netflix online library plus unlimited DVDs-by-mail with one disc out a time—that fee reflecting the combination of an existing $8 streaming-only option and a $2 premium to add discs. That's been replaced with a pair of a la carte plans at $8 each, one good for unlimited streaming, the other for the right to hold any one DVD at a time from their disc-by-mail catalog. An existing $2 per month premium to upgrade DVDs to Blu-ray Discs—the much preferred format for home theater enthusiasts—remains in place. So the total price for doing both the streaming and disc services goes from $10 to $16 for DVDs, or from $12 to $18 for Blu-rays. Not surprisingly, the outcry among users was instant and loud; just visit cancel.netflix for a look.

In short, Netflix blamed rising prices on all the nostalgic saps who've either resisted video streaming or continue to heavily use the disc-by-mail method for other reasons (perhaps to fill gaps in the Netflix streaming library of the most current, desirable titles). According to recent news reports, Netflix has faced burgeoning content licensing costs as content creators seek a bigger slice of the growing online entertainment pie. Combine this with the failure of the Netflix public to migrate more rapidly to a streaming-only model, and it means the people who still want discs will have to step up now and pay full freight, both figuratively and (sort of) literally.

But what does all this really mean for those of us who love home theater? The conjecture is that the new pricing will dissuade people from electing the disc-by-mail option and push us even faster toward the streaming-only model that Netflix sees as its future. In my editor's column in the July issue of Home Theater, titled "The Rush to Mediocrity," I cautioned that the rapid adoption of streaming video by the mass market holds dangers for home videophiles, who more fully appreciate the vast improvement in picture and sound quality that Blu-ray offers over even the best HD streaming. With brick & mortar video stores now a scarcity, Netflix becomes a more critical source for Blu-ray rentals. So, if the disc-by-mail option goes away or becomes prohibitively costly before the streaming pipeline has a chance to expand and deliver the full experience of HD discs, people who take image and sound quality seriously could find themselves stuck watching more and more of less and less.

And I do mean less and less. Not only is our digital bandwidth for streaming not expanding at the rate it needs to for the highest quality playback, but it's actually shrinking in one important regard. Consumer broadband providers, notably AT&T, have begun stretching their resources in this brave new world by limiting the amount of data customers can download in a month before significant extra charges kick in. While the 150 gigabyte limit might seem like more than enough for the average household, which is said by AT&T to use about 18 GB a month, by AT&T's own calculation that's only good for about 13 HD movie streams. And that's if you do nothing else all month. Not a whole lot of TV watching, I'm afraid.

Of course, in one sense, the Netflix rate hike is also an admission that, while you can lead a viewer to the streaming water, you can't make him drink. If the Netflix business model has to reflect that more people still want discs than originally anticipated, so be it. My advice: if you're forced by finances to make the choice between a Netflix streaming or disc-rental plan, get yourself a Blu-ray player and stick with the physical media for now, enjoying both better selection and notably higher picture and sound quality.

Mike's picture

WOW,yet another format!. I just went from s-dvd to blu-ray and 4k? Can wee stay with one format! same for computer gaming,new game comes out,i have to upgrade. Sick of playing this upgrade game!!

Ryan's picture

4K is light years away for home theater. Most digital cinemas today use only 2K. You would have a difficult time telling the difference between 1080p and 4K on a 65" screen.

Scott Wilkinson's picture

Mike, the upgrade game is a never-ending process, so you might as well get used to it. Still, as Ryan points out, 4K is years away, so there's no need to worry about it just yet. To Ryan's other point, seeing the difference between 1080p and 4K on a 65" screen depends on how close you are. I've seen 4K on such a screen that looked amazing, obviously better than 1080p, but that was from a few feet away.

Ryan 's picture

Scott to expand on your point. Is there a screen size, in your opinion, that is so large that that even 1080p sourced material begins to lose its image quality. In particular, I'm thinking about front projector screens sizes.As you pointed out, distance from the screen is important but I would imagine there is a case where you would need to go so far back that it is unreasonable.

dakmart's picture

To David P.: Roku offers TWiT, as well as the services Scott mentioned, Hulu Plus, Revision3, MLB TV and a wide array of other services, and adds new services all the time. Considering that Roku boxes are only $60-$100, it's an easy way to expand on whatever web offerings your TV or Blu-ray player has.

Scott Wilkinson's picture

Ryan, the screen size at which 1080p begins to lose its image quality is mighty big. Most commercial digital cinemas have a resolution of 2K (2048x1080), which is very close to 1920x1080, and they use much larger screens than just about any home theater. Sitting at a normal distance from those screens, the image looks very good to me. Now, I never sit in the first few rows of such a theater, but I'm sure I'd be able to see the pixel structure in that case, whereas I might not see the pixels in a 4K image under the same conditions.A couple of years ago, I had the opportunity to see a split screen with 2K on one side and 4K on the other on a very large commercial screen, and I was able to walk right up to the screen. With my nose nearly touching the screen, I could see the pixel structure on both sides, but obviously, the 4K pixels were much smaller.

Robert Gallo's picture

While I agree that 4K won't be viable for several years if at all for the home, I disagree with the statements about Panasonic. The Kuro's were Panasonic Professional Panels with Pioneer power supplies and GUI's. If you want a Kuro picture look to the Panasonic Professional series. Which incidentally doesn't crush the deepest blacks as the Kuro's did.

Scott Wilkinson's picture

Robert, I've never heard anything from my technical contacts at Panasonic and Pioneer that corroborates your statements, but I'll try to verify this specifically. And my Kuro certainly does not crush the deepest blacks, so I'm not sure what you're talking about there.

Matt's picture

Isn't Ramon still not going to see a high-def picture if he upgrades his TV but uses his AVR component out? Doesn't HDCP prevent a full high def signal from going out any other way but HDMI?

Scott Wilkinson's picture

Matt, component-video will convey 1080i, but not 1080p for the reason you cite. So Ramon will see HD with a new TV.

Enrique.'s picture

4K is not years away. JVC Pro makes them and Meridian re-badge them. I had the oportunity to see one in action on a 20FT wide screen with a 1080P BD as a source, upconverted to 4K and it was the best presentation I've ever seen. The real benefit however is on a very large screen.

Scott Wilkinson's picture

Robert, according to the former plasma guru at Pioneer, you are not correct. He has watched Kuros, up to and including the last generation, being manufactured in Pioneer factories. Also, he says that if you see crushed blacks on a Kuro, try turning down the room lights.Enrique, yes, JVC and Meridian make 4K projectors, as does Sony, but they are hundreds of thousands of dollars, so I'd hardly call them mainstream. I still maintain that mainstream 4K is years away. And yes, 1080p upconverted to 4K looks great, but not as good as native 4K content, which is also years away from being mainstream. Finally, you are correct that the real benefit of 4K is on a very large screen.