TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

Matt Drance comments on Netflix separating streaming and DVD renting plans:

The overwhelming majority says Netflix is squeezing customers for money. I say Netflix is dumping the floppy drive.

Dead on.

It isn’t like Netflix has been unfair about this. They offered a plan that gave us access to a huge library of movies and TV shows, and DVD rentals, for $10 a month. Think about the costs involved in building the infrastructure to stream that much video, the licensing fees, and the costs of sending, receiving and processing DVDs. They’re huge. That plan was a bargain.

And now that Netflix’s licensing costs are about to increase dramatically, there’s no way they can afford to offer plans that cheap. They could while studios thought Netflix was a sort of amusing business they could use to make a quick $15 million by giving them temporary rights to their libraries, but now that studios realize Netflix is a new distribution channel that scares cable operators, they’re charging commensurate amounts for their libraries.

Sending discs through the mail isn’t the business Netflix wants to be in. They only continue offering it because their streaming library isn’t good enough yet and a lot of their customers still depend on it. This isn’t about trying to squeeze a few more dollars out of their customers every month. This is about affording their very-real licensing costs and moving their users toward the business Netflix wants to be.