Netflix takes another jab

Shares slip after Amazon strikes a streaming deal with CBS.

By TheStreet Staff Jul 20, 2011 2:01PM

By Jeanine Poggi, TheStreet

 

The chips keep stacking higher against Netflix (NFLX), with Amazon (AMZN) announcing a streaming partnership with CBS (CBS) on Wednesday.

 

As part of the agreement, the e-commerce giant will allow its Prime users to stream CBS' television content. The terms of the deal were not disclosed.

 

Starting this summer, Amazon will add 2,000 episodes, growing its total number of Prime instant videos to more than 8,000 movies and television shows. It will also offer full seasons for 18 popular television series, including The Tudors, Numb3rs, Medium, the complete Star Trek franchise, Frasier and Cheers.

 

The move comes as Netflix has faced stark criticism from subscribers after a rate hike and outage.

Last week, the movie-rental company announced it is splitting up its popular DVD-by-mail and streaming subscription combo into two packages, which will now cost $16 per month, compared with $9.99.

 

Netflix experienced an outage over the weekend that lasted eight hours. The company said internal issues were resolved.

 

However, CNBC reports that Amazon is paying CBS 40% more than Netflix pays for its content from the network.

 

Shares of Netflix were falling 1.7% to $282.43 in afternoon trading Wednesday.

 

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8Comments
aue
Jul 21, 2011 11:05AM
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I have no problem with Netflix splitting their plans...IF both had the same EXACT content.  That's the real issue and what's behind people's anger.  The ONLY reason I even get DVDs is because they have the newer content.  And now Netflix is going to be putting more money into DVDs than streaming.  Bad move.  If Netflix really wants to have 2 different services then they need to offer equal content in each service with equal accessibility and development.  OR they need to stick with DVDs only and let others develop a fuller, richer, newer line of streaming content.  What they're really doing is making a HUGE price increase under the guise of giving customers a "choice."  It can only be a choice when you have the same options.  As soon as another company develops a complete line of streaming with all the newly released stuff, I'm gone!
AG999
Jul 21, 2011 9:19AM
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Netflix is opening itself up to future competition by alienating loyal customers now.  If the service was flawless (no broken discs) and the entire contents of its library were available for streaming, it could probably get away with charging $30/mo, but as it is, it's shooting itself in the foot.

Scylla
Jul 21, 2011 10:02AM
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The saying goes that "timing is everything."  How much revenue will Netflix lose [unnecessarily] because of a boneheaded marketing move? Even if the company decides later to add a bundled package price, it will have to overcome the obstacle of luring customers "back" rather than keeping current customers who were loyal but now distrust the company management. One posting based upon due diligence inquiry suggested that the large price increase was not justified by economic needs and was more of a "money grab."  That is typical of the short attention span, "get it now " mentality that drives young urban execs.

For my part, when a company's management shows me disrespect, I feel no compunction about spending my dollars elsewhere, even if service is equal. There are companies I use that cost marginally more, but in whose service i can rely.  This Amazon deal is certainly worth looking at and I now have little reason to stay with Netflix OR to return even if they change policies [which would probably only be temporarily].

Oldthor57
Jul 21, 2011 11:56AM
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Netflix management are completely out of touch with their customers. I can't believe they thought the average Netflix customer was so low browed that they could slip a huge increase by without the backlash. I for one will cancel BEFORE September 1st and move my streaming to Amazon and DVD rental to redbox, only a lemming would stay and get fleeced
xataran
Jul 21, 2011 9:09AM
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Highly amused by all this.  Netflix is still the cheapest option by value (price vs. available content), but it was really bad marketing/PR to hike prices so much at once.  I'm taking bets on how long it will take for a bundled option to reappear on Netflix (probably at a price higher than the old but lower than the new).
WorkingDad40
Jul 21, 2011 1:55PM
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My guess is that they are in trouble and have done the math for what they will need to do to keep the stock going. After all this is what it is all about now and nothing more. It is a shame that companies have to make this change from being a great company to focusing so much on revenue that they lose sight of why they were great in the first place.

 

I can afford the price increase, but I am not going to reward their greed. I choose to walk away and find an alternative where I am appreciated as a customer. I think they truly don't understand that the loyalty they built through years has just been destroyed in a day.

JRSJRS
Jul 21, 2011 9:53AM
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AG999, broken disks aren't Netflix's fault, typically that's the post office's. That being said, I agree with the comment that it could be ultra competitive and still be a little more expensive, but as it is, personally, I'm seeing less and less value from it. There are some TV shows I've caught up on through it, but I'm running out of older stuff to watch while things like Psych season 5, Castle season 3 (well, for streaming, all of Castle), Game of Thrones, etc all are in a holding pattern waiting to show up. I have the DVD and streaming services, but will definitely be getting rid of the DVD when the times comes. Is it really that much more expensive to send DVDs than the small amount extra that the DVD/streaming combo cost? My guess is no, probably not.
Ignatz Horowitz
Jul 21, 2011 4:20PM
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I can afford it, too...but if I didn't pay to watch when it was OTA, why in the world would I pay now? Boot. Leg. Free forever.
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