Customers angered by Netflix price hike

Red Netflix envelopes sit in a bin of mail at the U.S. Post Office sort center March 30, 2010 in San Francisco, Calif.

JEREMY HOBSON: Netflix is raising prices for its nearly 23 million subscribers. A bundled package for DVD-by-mail rentals and online streaming will go from a starting cost of $10 dollars a month to $16 dollars a month.

For more on this, let's bring in the host of Marketplace Tech Report, John Moe, who's with us live. Good morning.

JOHN MOE: Hey Jeremy.

HOBSON: Well, John, why is Netflix doing this?

MOE: Because they don't want to send you disks anymore. By last count, Netflix says it was spending something like $600 million a year in postage. And then you add in disks, distribution centers, printing those little red envelopes. They'd much rather just zap them to you. And if you really do want the disks they want help paying for them.

HOBSON: So they want to move everybody to the online streaming part of their business. Customers say they're outraged by this price increase. But do people have choices if they want to stream via Netflix?

MOE: Well, I mean there's cable which is a lot more expensive. Hulu offers this Hulu Plus package which is also $8 a month -- a lot of TV back catalog on there. Not as great a movie selection. I hear legend tell, Jeremy, of a stay video store still existing here and there up in the hills up among the coyotes and bobcats. And so basically you can get better selection and pay more or you can get convenience and pay less.

HOBSON: Yeah you mentioned cable by the way, I have to say, when I hear $16 -- compare that to a cable bill of like what, $100-a-month now. It seems pretty cheap.

MOE: Yeah, it's a question of scale. It's like when athletes are outraged that they're only being paid $5 million a year. It doesn't quite resonate, but it is more a month than what you're used to paying. But Netflix is also, you know they're making these deals with studios, they're trying to get more selection and if they get more people paying a monthly bill, then they can make those deals and get more stuff that we can all sit on our couches and watch.

HOBSON: John Moe, host of Marketplace Tech Report, thanks so much for joining us.

MOE: Thanks Jeremy.

About the author

John Moe is the host of Marketplace Tech Report, where he provides an insightful overview of the latest tech news.

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