Editorial: Netflix was too cheap before, but now it's just wrong

Yesterday Netflix did something pretty big: it cut the umbilical cord on its streaming video offerings. What was once a funny little niche offering, a rag-tag collection of canceled TV shows you never watched and '80s movies you never rented, had grown into something big, something that still wasn't quite great but was legitimately very good. As such, that service deserved its own plan, to stand tall and apart from the red envelopes that made the company famous.

But there's one problem: after cutting Instant loose, creating a new $7.99 streaming-only plan, Netflix stuck the dagger right in its own side by not re-thinking its disc-based rentals -- plans that looked a lot more valuable before than they do now. Netflix has succeeded in making its on-demand offerings so good that those unlimited snail mail samplings can't quite stand up on their own two feet anymore. At least, they can't stand up tall enough to support their $7.99 and up prices. Maybe, Netflix, it's time to go back to the fundamentals.

I won't fully recount the nearly miraculous growth and development of Netflix from its beginnings as a niche rental service, but here's a quick overview just to make sure we're all on the same page. The company's website went live back in 1998, charging $4 per rental plus $2 shipping on each -- an almost laughably high cost that, at the time, was quite comparable with what aging rental stores were asking of their card-carrying members. That only lasted until 2000, when the now famous unlimited rentals without due dates program began.

Since then Netflix has gone on to send nearly every traditional video rental store into bankruptcy, becoming the single largest source of traffic on the internet. The company that once got the US Postal Service all flustered is now a major reason why netizens everywhere are up in arms about network neutrality, and -- until yesterday -- it looked poised to only go up from there.

Now, though, I'm not sure what's going to happen. If previously you had the "1 DVD out at-a-time" plan with unlimited streaming, you'd be paying $9.99 monthly. That was, quite simply, an incredibly good deal. A really, really good deal. Under the new scheme that plan drops to $7.99 ($9.99 if you want access to Blu-ray movies), but if you want streaming you'll have to pay another $7.99. Now you're looking at $15.98 a month for the pair, which is still a damned fine deal -- but there are a few problems.

For one thing, Netflix isn't adding any new content to go along with this price hike. To say "our service today is worth 50 percent more than it cost yesterday" is awfully brash when that service hasn't changed a lick over that 24-hour period. Sure, there was that Star Trek deal from a few weeks ago, but the ability to revisit the Kirk vs. Picard vs. Archer vs. Sisko vs. Janeway debate (again) doesn't make up for such a big hike.

More importantly, the very notion of receiving a disc in the mail suddenly feels a lot more quaint than it did back in 2007, when users got one hour of "Watch Now" streaming for every dollar they spent on disc-based delivery. There was nothing to watch back then, but these days there's enough for me to spend way more time streaming stuff than spinning discs -- enough that I'll easily go a week or two without peeking to see what's in the latest crimson Tyvek pouch.

Why is Netflix doing this? Because that streaming content isn't cheap and, as more people watch, those licensing fees are only going to get higher. And that's just the beginning: if Netflix is hustling more data than anybody else on the planet, just try and calculate the company's hosting costs. This extra money coming in will help Netflix to go after more and better content, and to get it earlier -- but with this big price hike the company runs a real risk of alienating its subscribers, a sentiment that many of you have shared with us.

For me, as a subscriber myself, it's decision time. Will I keep my Netflix account? Yes -- at least partially. I like Netflix's streaming options more than what's on offer from the identically priced Hulu Plus service and, while I think Amazon Prime Instant Video will be a contender in the future, right now the lack of console support makes it a non-starter for me.

I'm going to think long and hard about canceling my disc services, or at least dropping back to the twice-monthly DVD plan. But, I'd really like for Netflix to take a cue from Redbox (and, indeed, from its original pricing scheme) and let me pay per-disc. More and more often I'm happy to wait for the random selection of decidedly non-new releases to pop up on the company's Instant service before I watch them. It's only the hot, high-impact, exciting new releases that I really want on disc. You know, the kind of movie you thought about going to see in the theater and totally planned to, but then one of your friends flaked or you got lazy or you called ahead for ticket prices and you decided "Yeah, I'll just wait for Netflix and put that money toward my college loans." Those are the movies that I want on disc.

Instead of the minimum $4.99 a month plan for two discs (a buck more for Blu-ray), Netflix should make a new one: $2 monthly to keep the lights on and then $2 for each DVD I rent -- $3 per Blu-ray. Subscriber of the streaming plan already? Knock off that $2 monthly fee and just charge me for the individual things that need shipped my way. With that I could still get the odd disc when I'm particularly hot for a new release but not be stuck paying $8 a month for the privilege of having a red envelope sit unopened on my coffee table.

Sure, it's almost anti-American to want to step away from the fully-inclusive offer, but this new plan would be like having full access to an all-you-can-eat buffet while also selecting an a la carte menu for those particular treats not found beneath a sneeze guard. That's the best of both worlds, enough to sate a content glutton who has a taste for the finer things, and the kind of exclusive garnish that might keep Netflix looking tastier than its rapidly improving, streaming-only competition.