The problem is many of Netflix's licensing contracts were based on user caps, so the more subscribers they get the more those licenses expire early and suddenly the new subscribers joining have a smaller streaming selection.
The ugly truth is a model like Amazon's where you pay a low rental fee like $2 for a streaming movie is probably the future for everybody. Netflix's current model doesn't hold up as they add more streaming content, unless the subscriptions go up probably even more than they are now.
I like netflix, because I use the dvd/streaming combo to stream things that are available, and get dvd/blu ray copies of new releases and old TV shows that I didn't watch when they were on. Watching Sopranos, Six Feet Under, etc. by having them send it to me saved me a ton compared to buying the boxed sets.
I don't like this new increase, because like all other consumers, I don't like seeing a price increase without any associated increase in the goods and services received, but I do understand it. And with movie ticket prices going higher and higher, it's unlikely I'll cancel anytime soon. Hell, it's going to cost me as much to buy me and my wife tickets to see Harry Potter this weekend as an entire month of netflix subscription, and we typically consume 12 to 15 discs of content per month plus the streaming.