To go all at once, or slowly bleed out?
It's simple really, and the fact so many people are up in arms about it mystifies me.
The management and board of Netflix took a look at the next two to three years and realized that the business wasn't going to be sustainable. Everything from postage rates, to disc acquisition, streaming, storage, and of course digital content acquisition. It's all going up. They had to come up with a new plan.
The plan they decided on (With access to way more information than us side-liners have, it must be noted) was to separate the streaming and physical sides of the business and price them according to their near-term realistic cost structures.
They knew this wasn't going to be popular, and the needed price hikes most certainly wouldn't be so they had a decision to make, either change it all at once - rip off the band-aid so to say, or bleed it over the period of a year or so. First new customers, then multi-dvd, then single dvd subs.
It's pretty obvious to both us and them that the price hikes would cause a reasonable drop in subscribers. Hopefully that would be counteracted by new subscribers, but nonetheless everyone had to know that it would happen.
It's important to stop for a moment and make one fact clear: at this moment Netflix has no valid, legal, competitor. While that may (and hopefully will) change over the next few years, the reality is that right now Netflix stands alone.
That last bit is important because if Netflix goes for the bleed out now, they run the risk of having a competitor for people to switch to later, whereas right now it's more or less an all-or-nothing approach.
Additionally, by finally doing it all at once they all but guaranteed any serious competitor will come in at the now-standard pricing (or even higher), and when doing deals the content owners will be expecting payments based on that cost structure.
Finally, after seeing just how severe the backlash was (more so than they anticipated would be my guess) they decided to go ahead and finish the plan, separate the businesses and start re-building.
They are neither short-sighted or stupid. It's a reasonable plan on their part and hopefully one which will work out well for them long term, albeit with a short term cost.
The pricing is still beyond fair, the selection is reasonable for the price, and they now can spend more time working on streaming content acquisition than physical aquisition.
Karl P