Netflix’s Rising Costs Lead to Price Increase

In a bid to improve and expand their streaming video company, Netflix recently announced that new customers will be paying a couple more dollars a month for their services to help defray rising costs. These costs include the prices they are expected to pay to stream the service, the cost of producing exclusive content and series, and their desire to acquire even more great movies and other content to offer their viewers.

As for the current customers, they will continue to pay the current prices for a generous period of time before they, too, will make the one or two dollar per month jump to the higher price. Currently, customers in the United States pay Netflix $7.99 a month for streaming movies and television episodes. Netflix also offers a DVD rental program wherein the customer can have out one DVD a month, also $7.99 a month.

ISPs that stream their content have voiced concerns that Netflix uses a great deal of bandwidth for the streaming content, and feel that the company should help defray some of the costs. Netflix CEO Reed Hastings accused the ISPs of gouging and limiting content “just because they can”. For further comments concerning this, view the video below.

The Netflix CEO explained that with the price increase will come even better programming and improved services. The issues of slow streaming have also recently been addressed as Hastings reluctantly cut a deal with Comcast concerning connectivity. However, he did not do so gracefully, since Comcast and Time Warner Cable are on the brink of a merger that could potentially give them a huge anti-competitive leverage. The company would then be able to charge interconnection tolls for access to their customers at any price they chose.

Also joining the fray, AT&T and Verizon both piped in that if Comcast got to receive an interconnection toll, then they ought to get one too, since they also stream heavy traffic for the company. Does this foreshadow a huge problem for Netflix because every possible ISP will suddenly demand part of their earnings to stream their content? Such behavior would surely be the downfall of the company.

Perhaps Netflix ought to consider creating an ISP of its own. At least that way Reed could be certain that there was no limiting of either his content or his bandwidth.