Deciphering Netflix Pricing Strategy


Very interesting article from Consumerist which analyzes the pricing structure of Netflix and how it works. Pretty interesting to see it not apply to the most common pricing, but I’m sure they’re relying on users to not be the intense users and constantly be sending and receiving new movies. I know even I have sat on a few discs for a full week even though I had already watched it.



The 3 DVD is an outlier here, which can be explained by Netflix’s competition with Blockbuster. In order to be competitive, Netflix aims to keep the 3 DVD plan (its signature plan) as low as possible in order to lure customers in. (Blockbuster charges $16 for 3). Once customers are hooked on a Netflix plan-any lower plan-they’re going to realize how slack they are to return movies and lazily decide to upgrade. That 4th CD is going to cost them, and so will the 5th, 6th, etc.