How Netflix's New Prices Caused a Customer-Service Uproar

Company Sends Consumers Mixed Messages About DVDs, Subscriptions

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Many Twitter users voiced their unhappiness with the price hike today.
Many Twitter users voiced their unhappiness with the price hike today.

Consumers complained loudly about Netflix's new prices today.

On Twitter, "Dear Netflix" was a trending topic on Twitter a day after Netflix increased the price for unlimited DVD and streaming rentals to $15.98 per month from $9.99 per month, as consumers threatened to cancel their subscriptions and turn to other options such as Hulu Plus or Redbox DVD kiosks.

The Netflix blog post announcing the new pricing structure has already reached its 5,000-comment limit.

Netflix's corporate Twitter accounts, @Netflix and @NetflixHelps, have been notably silent despite the outcry. "Responding to someone who's threatening to cancel and saying nasty things -- there's no value in that ," Netflix spokesman Steve Swasey told Ad Age today. "People have been vociferous in their response and we expected that ."

But calling Netflix's customer-service representatives has told a story of its own. In 35 calls BTIG Research made to Netflix customer service over the course of several hours, company analyst Rich Greenfield and his associates only reached a representative 15 times, with wait times up to 15 minutes. The other 20 calls, Mr. Greenfield wrote in a lengthy blog post, ended with this pre-recorded audio message: "Thank you for calling Netflix. We are experiencing higher than normal call volume. Please try your call again later."

The Netflix customer service representatives that BTIG did reach advised against quitting before the new prices affect existing customers starting Sept. 1, but Mr. Greenfield noticed some mixed messages after that . "Beyond that initial 'scripting,' however, we were surprised that Netflix CSRs [customer service representatives] did not appear to have a strategy for addressing customer complaints," Mr. Greenfield wrote. Some suggested canceling DVD rentals to save money, citing callers' low DVD use, while others suggested dropping streaming, citing the limited selection available to stream.

"We even had one person recommend alternating plans every month in order to keep pricing at $7.99/month," Mr. Greenfield said. "There was literally no rhythm or reason to the responses we got from CSRs, which is surprising given Netflix's focus on customer care/service."

Hiking prices for the streaming-and-DVD subscription seems designed to depress interest in the DVD piece, Mr. Greenfield wrote earlier in the day. Many observers believe Netflix may eventually phase out DVDs entirely in the U.S.

Netflix plans to only introduce streaming when it enters new markets such as Canada and Latin America, Mr. Swasey said. "All countries we go in the future will be streaming-only," he said.

But the new price structure will actually help Netflix continue to offer DVDs in the U.S., Mr. Swasey said. The company also introduced two DVD-only plans Tuesday: $7.99 a month to have one DVD out at a time and $11.99 to have two. "This gives DVDs a renewed focus and we will continue to be able to support that business for as long as people want it," he said.

Netflix's loss could soon be competitors' gain. Redbox, which does not require a subscription, offers DVDs for as little as $1, Blu-Rays for $1.50 and video games for $2 a day. The company averages about 55 million rentals a month, according to Redbox. Its Facebook page lit up today with comments at the expense of Netflix.

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