Roger Ebert: Why Netflix’s Price Revamp Was the Right Move

Poor Reed Hastings. The Netflix chief executive had a service so widely used that it accounted for a huge slice of evening Internet traffic. His customers and profits were growing quarter after quarter. And then, as he was taking his victory lap, a piano fell on him from out of the sky. He announced unexpectedly that he was dividing DVDs-by-mail and Instant Streaming into separate services; that essentially doubled the price if you wanted them both. When customers screamed with outrage and his stock price fell, he issued an apology that confused them even more, and the stock moved still lower.

Yet Hastings’s decision, I believe, was inevitable and realistic. Video streaming represents the future of Movies on Demand. It’s instantaneous, the overhead is lower, and continuing to mail DVDs is a marketing and distribution approach as obsolete as book rental libraries, the tented circus—or snail mail.