Netflix should have anticipated the loss of customers due to a price increase and factored that into their negotiations with the content industry. Although Netflix would be screwed without a sufficient variety of content for its DVD and streaming business, they are equally screwed with marketplace rejection of their pricing. Their management team needs to be swapped out.
The trick is to take a page from the RIAA playbook. They overstate the cost of piracy every chance they get. The Netflix strategy would be the doom-and-gloom projections of lost customers (thus reducing the value of the content to Netflix). If anything, Netflix underestimated the severity of the situation. What a bunch of idiots.
It's not easy to threaten to put yourself out of business if a key supplier is unwilling to play ball. But considering their eroding customer base, it's time to renegotiate those contracts and roll back the prices. Or fold up the tent and liquidate. The explanation to the content providers is simple: "We are in danger of going out of business. You can put us under by refusing to sell us product in a manner that is consistent with our pricing model. But it's going to cost you when we stop paying. After you finish off the other flat-rate services like Hulu, that leaves you with Amazon, Apple, and maybe Blockbuster. Lotsa luck negotiating with them after you kill off all of their competitors."
Steve Jobs had it easy with iTunes. Copying your old CDs and piracy were both "zero revenue" models for the music industry. Anything they didn't like about iTunes they quickly learned to tolerate when the alternative was no revenue at all. Netflix doesn't have that choice because video piracy is not that common.
It's obvious the video industry wants to abolish buffet-style pricing at the retail level. They missed out when brick and mortar video rental stores bought individual media and rented them repeatedly. Subscription pricing is perceived as less desirable because they are convinced that whatever the subscription price is, more money could be collected on a pay-as-you-go basis. What they fail to realize is that only about 20% of their content has enough of an audience to attract individual paying viewers. If they want to kill subscription services like Netflix, then 80% of their inventory might as well go in the dumpster.