The issue isn't really profit as much as it is marketshare.
The flawed assumption that people seem to be making is that Netflix will continue to dominate because it was first to market. But that isn't necessarily true. Netflix has to deal with several very viable competitors entering the market including Amazon who is essentially giving a streaming movie service away to entice people to sign up for Amazon Prime (Amazon has found Prime users buy far more than average users so it makes sense for them to incentivize those subscriptions)
It's easier to hang on to an existing customer then it is to acquire a new one. So the market wants to see Netflix hang on to its DVD customers because those customers will eventually go to streaming and will probably stick with Netflix to do it. When those customers leave Netflix's service it makes them up for grabs again.
That's the problem the market sees. They're looking down the road to a future where Netflix has 4 major streaming competitors (Blockbuster, Amazon, Walmart and RedBox with its discount $3.99 plan). So they want to see Netflix hanging on to its existing customers now.
Have you looked at the movies available to Prime members? It's like a roster of rejects from USA Up All Night.
Had an extra Sony BDP-S580 on hand this weekend so checked it out. After contemplating a Jenny McCarthy straight to video versus Clan of the Cave Bear, I had to switch to TV. Studio 60 on the Sunset Strip is great TV, but by itself doesn't make Amazon Instant Video a Netflix competitor.
Nice deck for $120 though, one of the few offering Hulu+.
I'm agreeing with your analysis in general. What do you think the odds are of Netflix dropping prices again in the face of competition as they did in 2004? That's certainly marketshare over profit. I presume they'd discount the hybrid customers which are precisely those members that are 'in transition'.
I don't think the odds are that great (though I think it's what I'd do in the same situation). I figure Netflix still thinks they have the right strategy and they've already taken the hit for the customer loss. So why not ride it out and see where it takes them.
Truth is they've probably earned a little arrogance in this arena. People questioned their streaming strategy at first and we all know how that worked out.
The flawed assumption that people seem to be making is that Netflix will continue to dominate because it was first to market. But that isn't necessarily true. Netflix has to deal with several very viable competitors entering the market including Amazon who is essentially giving a streaming movie service away to entice people to sign up for Amazon Prime (Amazon has found Prime users buy far more than average users so it makes sense for them to incentivize those subscriptions)
It's easier to hang on to an existing customer then it is to acquire a new one. So the market wants to see Netflix hang on to its DVD customers because those customers will eventually go to streaming and will probably stick with Netflix to do it. When those customers leave Netflix's service it makes them up for grabs again.
That's the problem the market sees. They're looking down the road to a future where Netflix has 4 major streaming competitors (Blockbuster, Amazon, Walmart and RedBox with its discount $3.99 plan). So they want to see Netflix hanging on to its existing customers now.