A case history of relative deprivation: Netflix raises its prices and people complain.

Transport yourself back in time about 10 years, and assume you have some kind of a decent job.  With the price of movie tickets pushing eight-nine bucks and pay TV offering a disappointing selection of movies, wouldn’t you have paid $16 a month for unlimited movies over your computer and one DVD at a time delivered to your home, no muss, no fuss?

Most people would have jumped on it like flies on honey. 

But now, when Netflix is unbundling streaming movies from delivering DVDs by mail, lots of people, goaded by the news media, are bitching about the new Netflix prices.

The media is trying to whip up protests against Netflix and thereby are exaggerating both the nature and the impact of the price increase. The media is completely absurd to dwell on the 60% increase in price.  In absolute terms, it’s only a few bucks more for something that’s dirt cheap to begin with.  I’m certain that the extra six bucks (which you don’t have to pay, by the way, if you select to receive either streaming or DVD but not both) will hurt some financially pressed families, but when six bucks a month is the straw that breaks the financial back, Netflix is the least of your worries.

One report says that 30,000 people have made negative comments on the Netflix Facebook page, which has 1.5 million Facebook followers; Netflix has about 23 million members overall.  Last time I checked, the protesters amounted to two percent of the Facebook followers and a little more than one-tenth of one percent of all members, hardly a groundswell of discontent.  Of course, the media is used to overestimating the impact of minorities, as demonstrated by its incessant Tea party coverage in the last election cycle.

But even if we discount the media feeding frenzy, it’s clear that a lot of people are pissed at Netflix, despite the fact that the product is still very cheap, especially for the frequent user.

The Netflix incident represents a perfect example of the concept of relative deprivation.  Here’s how Wikipedia defines relative deprivation: “Relative deprivation is the experience of being deprived of something to which one believes oneself to be entitled to have. It refers to the discontent people feel when they compare their positions to others and realize that they have less than them. Schaefer defines it as ‘the conscious experience of a negative discrepancy between legitimate expectations and present actualities.’ It is a term used in social sciences to describe feelings or measures of economic, political or social deprivation that are relative rather than absolute.”

Some perhaps not-so-hypothetical examples:

  • You’re willing to take a new job for $55,000 a year until you hear that they offered someone else who turned it down at $67,000.  You therefore balk at accepting their offer to you of $62,000.
  • You’re used to paying $2.00 for a gallon of gasoline, even though you know Europeans are paying $4.50.  Now you’re angry because you have to pay $3.90 a gallon.
  • Five months after buying your first smartphone, you find yourself complaining because the Internet downloads are slower when you’re driving through a tunnel.

Relative deprivation can make us resent a good situation or get us so used to a certain standard of living that we take unwarranted risks rather than cut back.  Relative deprivation is what happens when luxuries become necessities.

To the savvy consumer Netflix has offered an opportunity to save two dollars a month (or 20% using the media’s hyped up numerology).  In the unbundling, the cost for getting one DVD at a time or for unlimited streaming fell to $8 a month each.  Consumers who primarily use one or the other service can cut their costs, and also cut their footprint of overall consumption. 

That’s what we intended to do…but then…

We started to switch to DVDs only, since more than 85% of the movies watched in our household are not currently stream-able.  But then we saw that we could now get two DVDs at a time for just $12, so that’s what we did.  I’m guessing we’ll watch about 10-12 movies a month, all of which we’ll actually want to see, at a cost of around a dollar a movie.

Somehow I don’t feel deprived, relatively, absolutely or in any other way.

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