BGR reported several hours ago that Netflix is being sued for lying and essentially stealing money from its customers. The ones taking action are Netflix’s own customers, and this could be the beginning of a slippery slope that leads to very, very rough times for the video streaming king.
Before May, 2014, all new Netflix subscribers paid $7.99 a month for a subscription to the service. Besides the low price, one of Netfix’s major selling points in its early days, according to many sources all over the internet, was that Netflix subscribers would be “grandfathered” into their payment plan; that is, subscribers would never have to pay a higher monthly rate if they kept their subscription going uninterrupted, even if the monthly price was raised for new Netflix subscribers.
In May, 2014, Netflix did indeed raise its monthly rate for newcomers to $9.99 a month. It stayed true to its word, though, and did not change the monthly rate for existing customers.
This past May, though, Netflix sent out emails to its old customers that had had an account since before May of 2014, and were, for that reason, locked into the $7.99 a month plan. The emails informed the grandfathered Netflix customers, who were told their rates would never be changed if they did not break their Netflix subscriptions, that Netflix was rescinding the deal, and that, effective immediately, all Netflix subscribers, no matter when they had signed up for the streaming service, would have to begin paying $9.99 a month
Needless to say, this dishonest price hike upset a lot of long-time Netflix subscribers, who felt they had been duped. Like a shady drug dealer, Netflix had pulled them in with false promises and low prices, gotten them hooked on an addictive product (literally; The Huffington Post, wrote a great piece on the addictive qualities of Netflix), and then raised the prices on them once they were helpless to resist sucking it up and paying anyway.
Even worse, Morgan Stanley recently reported that 80 percent of the supposedly grandfathered Netflix subscribers had the price raised on them without being made aware beforehand that the change was happening; presumably, they no longer check the email address they supplied to Netflix when signing up years ago.
Now the previously lied-to customer base, which TIME says consists of 17 million people, or 37 percent of Netflix subscribers, is suing Netflix. That may seem silly at first, since the price is only being raised by a paltry $2 per month. If even one out of every 20 people who underwent the change participates in the lawsuit and each of them receives $50 (approximately two years worth of service), that is $42.5 million that Netfix might have to pay. Not such a paltry sum anymore, is it?
businessinsider: Just 10% of Netflix subscribers think its content is getting worse, even with catalog cuts … pic.twitter.com/aorGgXVL6V— Investing Insight (@InvestingLatest) May 24, 2016
Cinema Blend gives the example of George Keritsis, a Netflix veteran who signed up during the era where the service was $7.99 a month. Keritsis says the “grandfathering” part of the deal was a big part of what persuaded him to open his Netflix account, and he claims he had even called Netflix on the phone at the time and been assured by a representative that yes, the grandfathering deal was indeed genuine.
When he was informed in May that Netflix was going back on its word, Keritsis was understandably upset and called the Netflix contact number included in the email letting him know the rug had been pulled out from under him. When connected to a Netflix rep, George was told that the company understood his concern, but the company was raising the rates in the same way for all of the “grandfathered” Netflix subscribers; he was not being singled out or anything.
Of course, the Netflix rep’s response did not really address the issue, which is why Keritsis is now getting together a lawsuit against Netflix for which he will presumably recruit a lot more of his fellow cheated customers.
Netflix may have to end up paying a considerable fee to the subscribers it duped, but that may not even be the biggest of the problems it has created with this debacle. Not only did Netflix succeed in angering a huge portion of their customer base (again, TIME reports that the figure is 37 percent), but those affected are the oldest and most dedicated of Netflix users. They are the service’s most loyal customers, and pulling a dishonest move like this on them could result in many of them cancelling their Netflix accounts altogether.
This 21st century bait-and-switch, which is getting a considerable amount of publicity even outside the Netflix customers it is hurting, could even serve as a reminder that paid online video streaming platforms like Netflix or Hulu are highly-addictive and very dangerous, possibly decreasing the popularity of such services as a whole.
What do you think? Did Netflix screw up big-time, or is this just a small hiccup that will blow over soon due to the immense power of a huge corporation like Netflix? Make yourself heard in the comments section below!
[Photo by Gareth Cattermole/Getty Images for Netflix]