My uninformed opinion, but I think you guys are WAY off.
The price increase is what most are pissed about, especially considering they had a 20% increase just a few months before the most recent one of 60% . This company had a cult following, partially because they were innovative in delivering content, but mostly because they developed a rapport with their customer base. In the past when they made an unwise decision the customers spoke out and the company listened, a rare thing this day and age and it served to cement that company status with the customers. Hastings broke faith with the price hike for two reasons: First, very poor spin, the used the metaphor of a latte..."we are only raising the price of our service one latte", that did not sit well with the customer base. Second, hubris, the attitude since the price hike has been "I don't care what the customer base thinks, I am going to raise the price and end DVD service....screw you"...In Hastings most recent interview he likens the people who are upset to the "Tea Party", I kid you not, go read the interview that came out yesterday. This guy has completely lost touch or he is purposely trying to wreck the company.
Another key piece of info, check the insider trading for the past six months, Hastings has done nothing but sell, even he does not believe in this company anymore.
Will the DVD business die, most certainly, but it is not dead yet and to turn your back on it now is to walk away from a cash cow and a loyal customer base. Netflix can say streaming is the future, but their online catalog is crap and everyone knows it. Mix in the loss of the Starz deal and they don't look any better than Hulu or Amazon which both have a desire to tap this market. The dark horse is Blockbuster. Dish Network bought them for pennies on the dollar and they are putting together a serious challenge to Netflix, especially if Dish backs them with enough cash to expand the online portion...how prophetic would it be if Blockbuster rose from the flames like a phoenix to crush Netflix at their own game?
The real lesson and one that should play to the Air Force as well is the impact of social media. The bloggers and facebook had a field day with story. Recent issues in the Air Force like reflective belts and the VSP got some traction, but if another misstep gets anywhere neat the press this story did, it could have real impact on the way we do things.