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.)
It's okay, I'm not exactly sure what that means either, but it looks bad.
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?
Honestly, they were tinkering with a good formula that didn’t need tinkering.