For many people, Netflix is getting to be an essential service like gasoline and they will cut other entertainment to keep it. The studios will just end up swapping dollars if Netflix prices go up. People will simply drop HBO, Starz, Skinemax or other CATV tiers or drop those services all together.
Or Netflix will accelerate purchase or production of their own programming, making them Netflix exclusives.
Yeah, it is becoming their prime source of entertainment. Even in a sour economy, Netflix's subscriber numbers continue to increase. People will cut spending elsewhere before parting with their primary source of entertainment, including dropping other sources of entertainment. They may combine trips to save on gas or even buy a more economical car, but they won't drop their Netflix.
Except for the morning news I haven't watched "regular" tv in almost 4 years; can't stand commercials. Instead, I get up the day after one of our favorite shows has aired and download them to watch when I want to. Usually HD and NO commercials! Now if we could figure out how to get rid of those damned adverts they put on the bottom third of the screen... Netflix is our favorite for getting movies we want to watch again. Now NEW stuff is showing up and that's even better. I don't agree with splitting streaming and dvd's; but, hey, it is what it is. With having only DSL streaming doesn't really work for us anyway...