Everyone’s been complaining about Netflix the past few months (myself included) & their PR is obviously hurting. In the past quarter they’ve lost 810,000 subscribers & wrote shareholders to tell them the news. Their explanation is that “many perceived us as greedy… many of our long-term members felt shocked by the pricing changes, & more of them have expressed that by canceling Netflix than we expected.”
They admitted that the aborted plans to split DVD rentals & instant streaming into separate websites & companies was a big screw-up that increased cancellations but they’re considering it a relatively minor impact.
Their letter to shareholders said that both profits & revenue will be lower than expected & that the planned expansion to Ireland & the UK will be likely to push the company into the red next year but it’s expected (desperately hoped?) to be worthwhile in the long-term. In response their stock price has dropped from $118.84 Monday to around $75 now (That’s 37% for those keeping track at home.)
The loss of 810,000 subscribers represents barely 2% of their total, but the real problem lies in the price increase from $9.99/month to $15.99/month for DVD rental & online streaming. Only 7% of subscribers opted for the new package. So 7% of customers are paying 60% more while 93% are paying 20% less. The price inflation led to a revenue drop of about 14.4%. Ouch.
Hopefully for Netflix the millions of customers that will no longer require shipping & packaging costs as well as success in Canada & the upcoming UK expansion will assist in some form of balance. The irony lies in the fact that thanks to terrible PR, Netflix has ended up taking a major hit from the price hike when the price cut is actually causing most of their current problems. Is anyone really thinking “Poor Netflix” after all of this clusterfluffery?