By breaking apart the service into two offerings, Netflix is now forcing its users to think of the services not as a bundle but as two very specific different types of offerings.
On one side, we have the DVD service which can be compared, to some extent to the Redbox and Blockbuster direct services. From that standpoint, one has to consider whether he/she wants to rent DVDs of popular movies from those services or dig into Netflix’s more extensive options. The challenge, for Netflix, is that the DVD offering is not quite as cost efficient as the streaming one. For each DVD, Netflix has to not only have the movie on hand but also pay for shipping and return of the plastic DVD. I’ve heard that those costs are in the range of $.50 per segment or roughly $1 per DVD shipped. By comparison, streaming costs have been estimated to be in the range of $.10 to $.25 per stream, which is substantially lower.
On the streaming side, however, the Netflix offering is now something that can be compared to Hulu+ or Amazon Prime, two services that offer unlimited streaming. The Hulu+ offering is priced at $7.99, a price that Netflix is apparently looking to match with its streaming service. Amazon Prime is $79 per year (or $6.58 per month if you break the price down) and include streaming and free shipping for goods bought from Amazon. In both of the streaming options, the products are different: For example, if one’s interest lies more in TV offering, then maybe the Hulu+ service works better. However, what becomes apparent from looking at the different unlimited streaming services is that the offerings are still relatively slim, compared to what one might get from regular or cable television.
The 2-DVD option
There is, however, a path that Netflix has left open for those who are interested in doing a little hacking. Imagine a plan that would cost $12.98 and provide you unlimited streaming with a small backstop for DVDs. Only one concession needs to be made: the willingness to only receive 2 DVDs per month instead of the theoretical 8 one could get under the unlimited DVD plan.
Netflix offers a 2 DVD per month plan for $4.99. The trick to getting it is that Netflix does not allow to sign-up for it online. You must sign-up for a streaming plan (which it now defaults to) and then call their support number. Once you have called the support number, ask them to allow you to switch to the $4.99 plan. The person on the phone will first try to sell you either the unlimited DVD deal or the bundled option. Turn those down and insist on getting the $4.99 option. Once you’ve accomplished this, you will have a DVD plan that allows you to get access to the extensive DVD collection Netflix has. This can serve as a convenient backstop to the online streaming option.
One needs to then either create a separate account on Netflix to get access to online streaming or get a Hulu+ account. In either case, it would be $7.99 .
A question remains as to how long Netflix will maintain that loophole but for now, it may be a better option than paying 60% more than you previously did and it brings to mind questions as to whether Netflix is really a solid alternative to cable or other TV-related options.