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Netflix Should Raise Prices Again

Before it does anything, Netflix should sell its DVD unit prior to Hastings running it further into the ground.

Right now, DVD is a death trap, a suicide rap for Netflix. Hastings has to get out while he's young. Put it up for sale. Somebody will be more than willing to overpay for the business.

From there, raise prices. But do it the right way. Actually use some marketing and customer relations to pull the move off.

Observe how Sirius XM (SIRI - Get Report) handled its price hike. Pretty much flawless execution by CEO Mel Karmazin. I'm not a fan of much of what they do over there. But, he deserves credit.

SiriusXM basically said to its customers, "Listen. You really love our service and, given the economics of our business, we have no choice but to raise prices now that we are able." It worked like a charm because, if you really like or find satellite radio useful, an extra buck or two a month most likely means nothing to you.

Of course, Hastings has a history to deal with.

I would be blunt. Make the value proposition. Stress that without DVD, Netflix becomes a different company. A pure play streamer. We have exciting plans both on the content and delivery fronts (maybe preview some of them) and, to ensure that they happen and we remain healthy, we're going to start charging you $9.99, $10.99, maybe even $11.99 a month. Cable keeps getting away with much worse; why should the public treat Netflix, the anti-cable, differently?

If I'm Hastings, I would cut deals with high-profile networks and celebrities to offer customized, ultra-premium programming for an additional a la carte fee. But, that's just a thinking-out-loud aside.

The price hike, this time around, if executed with even a hint of competence, will not hurt the business. In fact, it would likely raise revenue, raise Netflix's profile, allow it to secure much better programming (on that basis, I would consider $12.99 or $14.99 across the board or as a "premium subscription" price) and, as a result, help it return to subscriber growth.

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