Netflix still in self-destruction mode
It's been about a year since the video rental company made a couple of really bad decisions. Things aren't looking much better now.
By Richard Saintvilus
Can you believe it's been about a year since streaming movie giant Netflix (NFLX) made a pair of self-destructive decisions?
First it moved to hike prices when its customers were struggling to make ends meet just to pay for basic household necessities. Then it turned around and announced plans to split its popular DVD delivery service from its streaming business -- a decision it later nixed.
Today, very little has changed with the company, and how it is perceived and its competitive landscape have taken a turn for the worse.
There was some good news in the company's most recent earnings report as Netflix met its targets and reported profit of 11 cents a share, topping the average analyst estimate of 4 cents. Revenue was $889 million, up from $788.6 million a year earlier.
The bad news is that the good news will be short-lived. That's because subscriber growth is slowing. In addition, Netflix forecast a fourth-quarter loss due to international expansion.
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After the earnings release, the stock dropped as much as 13%, although it has since recovered moderately.
The question is: How did things get so bad for a company that at one point could do no wrong?
It dates back to July 2011, when Netflix announced the price increase, which went into effect for existing subscribers on Sept. 1, 2011. Loyal customers who once bragged about being Netflix subscribers were not pleased.
Under the new plan, it cost $7.99 a month for either a DVD-only subscription or a streaming-only subscription. If customers opted to receive two DVDs at a time, the price went up to $11.99. On top of that, if DVD-only customers wanted to add streaming, that required paying an additional $7.99.
Prior to the change, subscribers enjoyed one DVD at a time as well as unlimited streaming for only $9.99 a month. After the change, the price of the same services jumped to $15.98 a month.
In response, 1 million subscribers cancelled the service, prompting Netflix's CEO Reed Hastings to issue a personal apology to each subscriber via email. But many of those subscribers still haven't returned.
I can't help but wonder whether it's not too late for Netflix, because the competition from Amazon.com (AMZN), Google (GOOG), Apple (AAPL) and cable operators such as Time Warner (TWX) and Comcast (CMCSA) has increased, and in some cases these rivals have surpassed Netflix.
Meanwhile, content owners have gotten savvy, and many of them are using the increased competition to charge more for their movies. And companies such as Apple, Google and Amazon.com are better equipped financially to pay for the best -- and most highly priced -- content.
The company to watch here will be Google, because it could make a bid for Netflix should the latter's shares continue to fall. After all, one of the benefits of its Motorola (MMI) acquisition was Motorola's successful cable-box business. So in addition to Apple's TV plans, there is the potential for Google TV to become a standard in streaming and home entertainment.
Let's not forget the progress that Amazon's Prime continues to make in addition to Comcast's own streaming service.
Competitors such as these can afford to pay for increasingly expensive content and gain control of the market, further weakening Netflix.
Can Netflix overcome this? Can it win a battle against Google, Apple and Amazon? It is hard to imagine that a year ago the stock was more than $300 per share. What investors are learning today is that as great as the service may have been, that did not justify an outrageous stock price or valuation.
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Ok, lets see if I understand this fully. Comcast is rising, well no thanks to a cable company. Amazon Prime is decent, but you have to pay a lot more there for the newer shows and movies. Google Tv what the heck is that? Ok, I don't have a device that supports it, so why would I want that service.
I think I will stick wth Netflix for now and since I have Amazon prime as well I think I got just about all I need for this my tv needs.At 7.99 a month Netflix is still a bargain, so the writers here don't have a clue.
Just some suggestions to make Netflix a more user friendly experience:
1) In the listings, sepearte TV shows from Movies.
2) Organize both TV and Movie listings alphabetically
3) Add some a greater number of new releases to the ancient stuff.
4) Larger library.
Please listen Netflix,
If you want people to flock back, get better movies when they are first available, and make them available for streaming.
Who wants to pay for 2nd-3rd rate movies, or have to wait to see 1st rate ones when we can get them elsewhere.
Give us what we want at a fair price = company that grows and make $= Everyone happy!!
People have forgotten the arrogance of the NetFlix CEO. THAT is why I dropped the service and won't go back. What was his response to concerned comments from his customers? In essence, he said "go away, there are other suckers out there".
Not sure why that didn't make other people angry.
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