Netflix loses top hits in strategy shift

You won't find many box-office winners from last year on the company's streaming service. There's a reason for that.

By Kim Peterson Jan 20, 2012 4:11PM
Image: Watching television (© image100/Corbis)Where have all the Netflix (NFLX) hit movies gone?

Internet veteran Tristan Louis has an observation that should come as no surprise to a Netflix streaming subscriber: The biggest box-office winners aren't on the service.

Netflix streams only five of the top 100 box-office winners of 2011, Louis notes. That's down from 10 in 2010. You can, however, find most of those hits for rental or purchase on Amazon (AMZN) or iTunes from Apple (AAPL).

Netflix doesn't stream the latest Harry Potter movie, for example, or "The Hangover Part II" or "Transformers: Dark of the Moon." In fact, you have to go all the way to the 29th-biggest hit of last year, "Gnomeo and Juliet," to find something on Netflix.

In the following video, one analyst says Netflix is poised for losses.

Post continues below.
That's an endless source of disappointment for Netflix subscribers sitting on the sofa on a Friday night staring blankly at their computers. "Well, honey, it's either 'No Strings Attached' or 'Justin Bieber: Never Say Never.'" Ugh.

So Netflix isn't going to be the hit repository that some subscribers had hoped. But that's not what the company wants, Louis says.

Look at what the company has chosen to spend money on instead. It's bought an exclusive show, paying for a jaw-dropping 26 hour-long episodes of "House of Cards," starring Kevin Spacey. It's also debuting its own original series, "Lillyhammer," starring Steven Van Zandt, next month.

It looks like Netflix wants to be its own online TV network.

And it's not the only one. Check out what Hulu is doing. The online video site has announced two new shows this year, including a half-hour comedy about a wacky U.S. Senate campaign. Hulu started its original content push last year with "A Day in the Life" from director Morgan Spurlock.

Investors have been of two minds with Netflix this year. Some hope for strong subscriber trends, particularly as Netflix establishes more of a footing overseas. Analyst Eric Wold from B. Riley & Co. has raised his price target for the stock to $125, saying he remains optimistic about Netflix's domestic positioning and market share potential, according to Barron's.

On the other side of the equation is David Miller of Caris & Co., who says Netflix is still paying to sell its brand to former subscribers. It's also running up costs expanding into the U.K. and Ireland, he added. Those expenses will shroud domestic profits in the near term.

So Netflix is trying to differentiate itself from Amazon and Apple by forgoing box-office hits in favor of original shows and an ever-expanding television lineup. Is that what its subscribers want?

Meanwhile, Redbox is riding high with its kiosk DVD model, seeing unit volume rise by 29% last year. Redbox, owned by Coinstar (CSTR), has now seen its share of the movie-rental market rise to 37% from 25% in 2010, according to The NPD Group.


216Comments
Jan 23, 2012 12:28AM
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Really?  Netflix is now making their own TV shows?  I already have a TV with many channels and new shows coming out all the time- I could really care less about seeing Netflix's original programming.  I for one would much rather see Netflix use those funds to provide access to more streaming options.  The main thing I joined Netflix for was movies.  While I appreciate the fact that they have added some good TV shows to their streaming options, I would love to see some newer movies on there as well.  I have been able to use their DVD service successfully to get new movies, but I love being able to watch things instantly through my Wii or computer.  Please Netflix- forget about these silly forays into original programming and concentrate on building your movie streaming library.
Jan 21, 2012 6:48AM
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Those that continue to insist that people stop complaining don't understand society very well. It also amounts to an attempt at censorship by bullying others into not exercising their right to protest. (To see if you are at least being consistant, check how you feel about the occupy movement.)

 

The continuing claims that we have nothing to complain about is hooey. Here is the real list;

During a monumental economic downturn, one of the only businesses to remain profitable increased its price... A LOT. When the people struggling to make ends meet said hey, this seems a bit much, the company said tough. (This is a cornerstone of the problem, with major corporations folding left and right, a profitable company, instead of choosing to lose a little margin or streamline like other companies were doing to survive, decided a massive price increase was the answer.) 

 

This was followed by the revelation that the recent decreases in content that were implied to be temporary contract issues that would get resolved, would in fact likely not get resolved and would be joined by more lost content. As customers we stopped and said, wait, what?

 

This was then followed by the announcement that the service would also be less convenient. What was a one stop entertainment source would now be two completely seperate services with no ability to reference one against the other. Here is why this was a big deal. A lot of us are busy and already have enough time sucks in our lives. Having to search two services seperately for a movie that may not be available, even if it was previously, is very annoying when for years we were able to do one search only.

 

So as consumers, when a lot of us had less to spend on our daily needs and a few entertainments, we were asked to pay a lot more for a lot less. Summed up, profitable company, bad economy, charge lots more, deliver lots less. Why are we mad? Oh yeah, the icing on the cake. When the cries of foul and the exodus of customers became too great to ignore, the head of the company, who was responsible for all of the questionable moves, apologized by essentially saying that he was sorry the customers were too stupid to understand why the changes were necessary.

 

I find the list of offenses unforgivable. It is the same as when we all left Blockbuster. It's talked about now as if it was just the late fees that drove the exodus away from them, but that isn't the whole story. First Blockbuster made sure their stores were physically positioned to drive other rental stores out of business. Then, when competition was minimal they began enacting policies that looked for ways to grab as much from the customer as possible. Late fee policies were manipulated to maximize Blockbuster profit and when it was discovered that large numbers of customers would leave a late fee balance unpaid for awhile, especially if it was a small balance, it was decided they would put those customers in collections to maximize profit. This unfortunately failed to account for the fact that most of those customers did pay the next time they wanted to rent a movie and that after being in their collections department, wouldn't come back to rent another movie. When companies lose sight of the importance of their customers perception of them they lose.

Jan 21, 2012 8:24AM
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I totally agree that the streaming movie selection is just awful.  I find it also bewildering that rather than improve this by offering better movies quicker they want to keep it as is and find more revenue overseas.  Where has the business ethics gone that a company provides the best they can because that is what their customers want rather than just provide a mediocre service and sell it worldwide.  It's just such a half @$$ way of doing business.  If they want to regain/maintain their customers it's very simple, offer a great service at a reasonable price and the company will prosper.  why is that so difficult to comprehend.
Jan 23, 2012 1:03PM
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Netflix will never have all of the better films.  They can't afford it, because hollywood execs. are too greedy....
Jan 23, 2012 12:42PM
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I honestly feel Hollywood wants to destroy the affordable rental industry, perhaps to help save floundering theatre numbers and DVD/Blueray sales.  They control what all these companies can make available and they are trying to cut their supply.  Netflix has crap to stream and DVDs by mail get slower and slower to save postage...and just wait until the post office goes to no weekend delivery.  Blockbuster is dying...here in Augusta GA ALL the stores are closing, telling customers they are "moving" to blockbuster.com.  I fully expect the attack of Hollywood to next take on Red Box...they already delay the movies availability to Red Box...how long before they won't make them available at all.   
Jan 23, 2012 12:19PM
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Dropped the DVD plan when they separated the online streaming and DVD's by mail. $16 a month was too much. Recently dropped my cable provider and now am saving $65 a month. Now I have an extra $65 a month. Guess what? I'll go back and add Netflix DVD's for $8 a month and still save $57 a month. Stick it where the sun doesn't shine cable company.

Average cost of monthly cable: $60 + a month
Average cost of Netflix streaming and 1 DVD per month: $16

Now..... which plan would you prefer.

That being said I think I'll have a rolling rock.

Jan 23, 2012 9:56AM
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Tried to watch "The Fighter" one night. Had it stop three times watching it. I do not care if its considered cheap or not. Its not a good service for any price. A lot of this old content is available for free on its own networks. Netflix lost my sympathy a long time ago. They are in fact a content provider. If you cannot provide good content. Then what good are they?
Jan 23, 2012 3:03PM
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I'm always confused about articles like this.  What do the authors think Netflix Streaming is?  What do people really expect to get for the $8 per month that you pay to stream Netflix?  Like other articles, this article mentions that you can get newer movies from Amazon and iTunes.  However, they never mention that you will normally pay .99 up to $3.99 or more for each "rental" in order to stream the movie.  You rent 2 movies from iTunes and almost have paid more than an entire month of unlimited streaming from Netflix.  Netflix streaming is supposed to be a supplement to the discs.  However, I have now canceled cable and live on Netflix and Hulu each month.  There is more than enough content on Netflix to watch TV for years, but you have to accept what it is.  You have to realize you get your programming a little later than others.  I have to wait a month or two after most of my favorite shows go off TV for the season before they appear but I still get to watch most.  So to the authors out there, quit comparing Netflix to Amazon and iTunes and quit expecting first run movies on Netflix for $8 a month.  Maybe down the road Netflix will do tiered pricing so for $15 a month you get top 100 movies and for $8 a month you don't. But until then, not sure why everyone is so mad at Netflix.  What other service do you get HD programming for $8 a month on dozens and dozens of devices, all easy to use?
Jan 23, 2012 1:21PM
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Really ? What are you all complaining about ? How can you all talk so poorly of Netflix ? for your 8 dollars a month you sure want a whole heck of a lot dont you ?  You can barely buy one value meal for 8 bucks ! Or two gallons of gas ! But you feel cheated by Netflix ? with streaming you can watch two shows at a time on two different devices all day and night long as much as you stand to watch ! all with no commercials ! for 8 bucks ?  i dont get it . its a great service .
Jan 21, 2012 1:10AM
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I used to have 3 DVDs and streaming. I love the ability to stream video instead of having to go rent a movie or wait for the mail. Sometimes it takes 2 to 3 days to get new DVDs. I got a Roku player, absolutely love it. But Netflix promised with the higher prices more newer streaming movies. I am so disappointed. I dropped the 3 DVDs to 1, then I dropped that because of the delivery rate of the mail. Now for a new movie I watch for an Amazon special and stream it. Bottom line is that Netflix has forgotten their longtime customers and treated us poorly. Promises have been thrown out the window. I don't want to see a tv show, if I did I'd watch regular tv. They forget people started subscribing to Netflix for the MOVIES! They haven't even fixed their searches to show the newest movies available. When you scroll there is no telling what will appear. I have to use another Roku app to find the newest releases that don't show up in the Netflix app. I hate out of touch businesses. I bet the CEO must have gotten a raise because the customers got taken for a ride. If I switch, I might try Blockbuster if they include a lot of movies with the price. I think the moves of Netflix have been a disaster. It's not an increase in the price of new movies that prohibits them for having them, it's their greediness to expand their enterprise without any concern for their current customers. Either your are going to pay for old out dated movies and subtitled foreign films (which are their version of new releases) and pay twice the amount for less, or your going to move to another service. I'm checking out other services.
Jan 23, 2012 10:32AM
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I can't believe that the CEO of Netflix thought that people would go for his streaming service without the DVD service when the streaming service selection is so bad.  I've had Netflix for a long time and the streaming service is horrible if you want to watch most recent movies. 



Jan 23, 2012 5:05PM
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If I wanted to watch the junk on television, I would turn on the television.  I pay for Netflix for the movies .  I don't want the company to spend money on original movies or television shows.  I just want the latest movies, thank you.

 

Jan 23, 2012 11:33AM
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I am sitting here reading everyone's comments about Netflix and the streaming aspect of it! What a lot of people don't understand is, movie companies like Paramount, Universal, 20th Century Fox and etc. don't like their movies on an instant watch website until they get their monies worth! Starz, is actually starting their own HBOgo! And will soon be pulling from Netflix! HBO has already stopped selling their series shows like Boardwalk Empire and True Blood to Netflix, just so HBO can bring in more subscribers to HBOgo! The thing is, you are all going to see a major drop in watch instantly movies! And you are going to be viewing stuff from UK and Europe! Why? Cause that's the only thing Netflix is going to afford! It's not about Netflix taking the extra money and buying more movies to watch instantly, it's those companies who have realized that if Netflix can make 8 bucks a month, then why can't they! My second guesses about staying with the company have crossed my mind many times a day! Why? Cause why spend 8 bucks a month for stuff that you're never going to use! I have been with Netflix since 2004, and just like the economy and everything around us, it's always time for a change! Unless Netflix shows a vast improvement, I'm just like everyone else, I'm going for the place where you get more bang for your buck! Sorry Netflix, but I'm an American, I want everything for free!!!!
Jan 20, 2012 5:22PM
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I actually have zero problem with the lack of current "hits" on Netflix.  I don't expect them.  I scour what is available and find many classics (especially some of the top foreign films of all time) and if for some reason I'm in desperate need to be dumb-downed by a current hit, I'll grab Transformers or Hangover II at Redbox at the supermarket. 
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I just cancelled my free 30 day subscription to Netflix this morning... Last night I sat on our living room couch with my wife and two teenage kids looking for a movie to watch. We scrolled and scrolled through every available movie and we were not able to find even one that we were interested in watching. No thanks Netflix!
Jan 23, 2012 1:03PM
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Reed Hastings the CEO needs to be fired. Way too many moron decisions are being made that are driving off subscribers. He is totally out of touch with it's customers. For the first time, I am looking at other options. Netflix is quickly losing it's appeal to me.
Jan 23, 2012 1:15PM
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There is a limited application for which Netflix is excellent.  I am the father of a three year old who enjoys the occaisional episode of Thomas the Tank Engine or Dinasour Train.  It is really nice to be able to simply let him view icons of many cartoon characters or screenshots of many episodes and pick a show that he would like to watch.  Streaming television shows for children can be a nice supplement.  No substitute for reading with him of course, but when it is time to watch a kids program or two, Netflix makes it fast and easy.  With a small child, fast and easy entertainment has it's place.
Jan 23, 2012 1:05PM
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Thanks for reminding me to cancel Netflix!  :)  To answer your question, "So Netflix is trying to differentiate itself from Amazon and Apple by forgoing box-office hits in favor of original shows and an ever-expanding television lineup. Is that what its subscribers want? "

 

 

NO

Jan 20, 2012 6:55PM
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The cable companies have been screwing the public for years, monopolizing the markets and over charging everyone.  Netflix came along and we were able to give comcast the shaft; granted the CEO of Netflix is a moron, and his board of directors penalized him for his idiocy---if they could only muzzle him.  That being said the movies that hollywood has been releasing in the past 5 - 10 years, have all been remakes with a different name.  Most suck.  I have no problem streaming an old classic from Netflix for 8 bucks a month, rather then paying 125 for cable. 

 

Maybe I am a fool for keeping Netflix, but I am a fool with an extra $1000+ bucks a year to spend on booze and hookers... and that my friends is real entertainment. 

Jan 23, 2012 12:19PM
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I have streaming only with Netflix. Yes, I'd like to see more top movies but for $8/mth it's still worth it. There are plenty of good movies on there. I watched 'Buried' last night and thought it was great. 'The Machinest' another good movie. Then there's Family Guy, Bones, The Tudors, Spartacus. Plus, I get to watch any of this stuff on my Kindle Fire when I'm on the road. For $8/mth it's still entertainment for me and I haven't bought a movie in months !!!!

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