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Netflix obviously predicts that its customers who love streaming will go streaming-only (if they haven't already), those who only use DVDs will drop streaming, and they will make up the revenue by enacting a large price hike on everyone who wants both. However, I think they are overlooking the fact that most of their customers will probably suffer from the sticker shock of a 30-60% price increase and may ask themselves if they really need both services, at which point they will probably downgrade one way or another.

I am personally in that third category. I LOVE the convenience of streaming but frankly the selection has dwindled in quality lately. The new additions consist mostly of second-rate older movies or straight-to-DVD titles. Once in a while there is something good thrown in there but it's not frequent enough to justify a $5 price increase on my 2-at-a-time plan. For example, out of the 36 items in my queue, only 4 are available to stream. If 40% of my bill is going to be specifically for streaming, then 40% of Netflix's content needs to be available via streaming. Anything less and its not worth it IMO. But I know if I go DVD-only, I'll miss having it. Plus typically with DVDs there is such a long wait for new releases that I just end up getting it from Redbox anyway.

I'll probably end up dropping streaming and keeping my 2-at-a-time DVDs for now, and taking my savings to Redbox when Netflix's takes 3 months to send me a new release. If I miss streaming that much or if they drastically improve their selection then I might switch to streaming-only, and take my savings to Redbox for new releases. Either way, Redbox will be getting more money from me and Netflix will be getting less.