07/14/2011 05:18 pm ET Updated Sep 13, 2011

Netflix's New Pricing Model Makes Sense if You Use Other Services for Newer Content

As you may have heard, Netflix has changed its pricing model so instead of being able to get unlimited streaming plus one DVD in the mail for $9.99, you'll now pay $7.99 a month for streaming plus another $7.99 a month for a single DVD. For those who want both, that represents a whopping 60% price increase.

Not surprising, the blogosphere and Twitter are buzzing with complaints as is Netflix"s Facebook page. I haven't read all of the more  60,000 comments there but most of the ones I did read were not from happy campers.

I'm OK with Netflix's streaming only service

Personally, I'm not affected by the change because I subscribe to Netflix's $7.99 streaming only service. I used to get DVDs in the mail but I found myself hardly ever watching them. One disc sat next to my DVD player for more than a month before I finally got around to returning it unwatched.

I'm OK with Netflix's streaming service and I have no intention of quitting even though it offers only a fraction of the content available on DVDs and hardly any new content. That's partially because I'm a sucker for old movies and TV shows. I love classics and even some of the black and white "b" movies from the 40s, 50s and 60s. And I love some of the TV shows on Netflix including Monk, The Rockford Files and even The Dick Van Dyke Show.

Netflix Business model

Also, like all businesses, Netflix needs to have a model that's sustainable and I believe them when they say that they can't afford to mail you a DVD for only $2 a month over the streaming only service. If someone orders a movie a week, that's more than four round trips a month. $2 wouldn't even cover the postage not to mention the cost of running the service and buying the DVDs. Also, the company is having to pay more for streaming rights from the studios. Netflix needs to find models that work for both its streaming business and its DVD by mail business. I'm not sure if the new pricing model is exactly right, but I can understand why they felt a need to unbundle streaming from DVDs.

Even though they are keeping their DVD by mail service, Netflix's heart (as its name implies) is on the Net side of its business. There may be a few years left in the DVD rental business but the future is in video over the Internet. Rather than stretching to be the low-cost leader in a diminishing business, Netflix is smart to be the innovator in what is obviously going to be a growing market of instant video on demand not just to TVs and PCs but to mobile devices as well.

Alternatives to Netflix

Of course, you can't live by old films alone but there are plenty of other ways to get newer content including Amazon's instant video service, iTunes and even the few remaining neighborhood video stores or those $1 a night video rental kiosks at grocery stores.   For more options, see CNET's 9 Netflix Alternatives and the Huffington Post's Netflix Alternatives for those who don't want to pay up.

My favorite video source is by invitation only

My favorite way to watch new DVDs is on which is so overwhelmed with customers that it's taking requests from people who want to be invited to sign-up. I got in before they started limiting membership and I pay $10 for 10 movies, including DVDs the day they come out. You can also pay $2 per movie but the $10 deal is a lot better.

Like Netflix and Amazon, the movies are streamed to my computer or my Google TV (which lets me watch them on my big TV) but instead of streaming content from a server, they "rent" you an actual DVD and DVD player that they house at their facility. They play the movie and deliver it to you via the Net so that, for the most part, the experience of using Zediva is similar to other streaming services except, like that old-fashioned video store, it's possible that the title you want to watch might be "rented out." Also, the process of starting a movie is a bit slower because it involves software control of a real DVD player, but unlike most other premium services that make you watch the movie within 24 or 48 hours, you get to watch them as many times as you want for a 14-day period.

Oh so early 21st century

Netflix's move may have angered people this week but in the future, we'll all look back on DVDs and even Blu-ray as being oh-so early 21st century. It's almost time for the DVD and Blu-ray players to go the way of the VHS machine.