Reed Hastings changed the way folks rent movies. In just four years, nearly 2 million people have turned to his Netflix DVD-rental service to avoid soul-crushing trips to Blockbuster, paying $19.95 a month to have movies sent via mail. Now, facing competition from Wal-Mart and broadband movie-on-demand services, Netflix announced it's raising its prices to nearly $22 a month.
Maybe the quarterly loss of $5.8 million they announced yesterday has Netflix spooked, but I'm not sure this is the answer. After all, why would customers looking into trying a subscription-based system for the first time pay $22 a month to Netflix, when they could just as easily head over to Wal-Mart's website and pay $15.58 for what's essentially the same service? Rather than raise prices for consumers, especially when Wal-Mart will drive prices to the floor, Netflix should be looking for ways to reduce operating costs. Perhaps that's why Hastings said Netflix would launch its own movie-download service sometime next year.