Netflix stocks fall, customers leave due to price hike... - High-Def Digest Forums
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Old 09-15-2011, 05:43 PM
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Default Netflix stocks fall, customers leave due to price hike...

http://finance.yahoo.com/news/Price-....html?x=0&.v=1

Quote:
Price Hike Sends Netflix's Stock Downward


BRIAN STELTER, On Thursday September 15, 2011, 10:01 am EDT
In wake of new prices that force some customers to pay more, greater numbers of people are canceling their Netflix subscriptions than the company expected.

The company on Thursday morning revised downward, incrementally, its subscriber estimates for the quarter of the year that ends in two weeks. It did not change its financial guidance for the quarter. Still, its stock dropped almost 15 percent in heavy trading when the market opened Thursday.

The revision reflects the negative reaction to Netflix's decision, announced in July, to separate its DVD-by-mail service from its faster-growing Internet streaming service. Before, DVD-by-mail was a $2 add-on for some streaming subscribers; now, each service now costs $8.

Some subscribers were upset by what was effectively a price hike, and a subset of them have cancelled their Netflix accounts.

In July, the company said it expected that it would end the third quarter with 22 million subscribers to the streaming service, 12 million of whom would also opt for the DVD-by-mail service. It expected back then that 3 million would opt only for the DVD service.

Now, it's expecting that just 2.2 million will opt only for DVDs, a drop of 800,000.

Netflix also anticipates a slight drop in streaming subscribers, to 21.8 million, a difference of 200,000 from the earlier estimate. It still expects 12 million of those streaming subscribers to also pay for DVD-by-mail, helping it to generate more revenue overall.

"Despite the guidance revision, we remain convinced that the splitting of our services was the right long-term strategic choice," the company wrote in a letter to shareholders on Thursday.

Earlier this summer, Netflix's chief executive, Reed Hastings, said he recognized that "we have to face those subscribers who are upset by the price hike this quarter."

He said then that the price change would benefit Netflix in the fourth quarter and beyond, and that the company intended to spend the increased revenue on its streaming service, partly on research and development. "As our subscriber base continues to grow, we're able to spend more on improving that service, both on the R.& D. side and on the content availability side," he said.
Can't say I'm surprised, though how this will affect overall BD revenue I have no idea...
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Old 09-15-2011, 06:23 PM
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Stock is down almost 20%. Ouch!
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Old 09-16-2011, 12:52 AM
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Something doesn't make sense here.

Their old predictions:
Stream only: 10M
Both: 12M
DVD only: 3M

New predictions:
Stream only: 9.8M
Both: 12M
DVD only: 2.2M

Baffling. They predict differences in the two areas that didn't change at all: Streaming did not go up in price, and "DVD only" went DOWN in price. Of course, there never was a "DVD only" plan, but customers who only used DVDs and let their streaming set unused are now paying less--these are the people who were jumping up and down with joy at the price change, not primed to cancel.

Yet they predict that the segment that received the largest price increase is going to remain the same? Doesn't make any sense at all.
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Old 09-16-2011, 01:26 AM
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Not interested in the stock price much but ye gads.
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Old 09-16-2011, 03:44 AM
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Strange... I don't remember seeing this marketing strategy having been predicted to be this disastrous in any of the "primer" posts that have been written around here.

I do however remember saying quite clearly myself that this was likely going to be the way things played out several months ago.

Now I am just waiting for the other shoe to drop when the streaming only customers start falling off once they realize that there will be a lot less content available to them soon.
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Old 09-16-2011, 08:04 AM
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Quote:
Originally Posted by Jables View Post
Something doesn't make sense here.

Their old predictions:
Stream only: 10M
Both: 12M
DVD only: 3M

New predictions:
Stream only: 9.8M
Both: 12M
DVD only: 2.2M

Baffling. They predict differences in the two areas that didn't change at all: Streaming did not go up in price, and "DVD only" went DOWN in price. Of course, there never was a "DVD only" plan, but customers who only used DVDs and let their streaming set unused are now paying less--these are the people who were jumping up and down with joy at the price change, not primed to cancel.

Yet they predict that the segment that received the largest price increase is going to remain the same? Doesn't make any sense at all.
Don't forget though that both charts are projections, so the difference doesn't mean that people have quit those plans, it means that fewer people have switched to them than they expected. Basically, it looks like an extra one million of the people who used both and who Netflix had presumed would either switch to streaming only or disk only, actually quit altogether.

Still, I do agree there's something very odd about those charts, and it also relates to the DVD only-subscribers, though my take is slightly different.

Like you say, it's unlikely any DVD only subscribers would quit, since they effectively got a price drop. Netflix has been pretty tight-lipped about the numbers of people who stream, but the last official word I saw was when Netflix's Bill Holmes said at the end of March that 60% of subscribers streamed content, which obviously would leave 40% not using streaming.

If we presume he was giving an approximation and pick 33% as a round number, that's about 7 million subscribers who weren't streaming.

I really think if they'd managed to reduce the number of DVD-only subscribers from 7 million to less than 2.2 million in less than 6 months, they'd have said so, that's the sort of stat they like. It seems very unlikely to me, but if they did manage to do it, it might at least explain some of the anger - that would be about 5 million or so DVD only subscribers who'd recently started using streaming, only to then be hit by the 60% price hike shortly after.

Ray Von
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Old 09-16-2011, 09:37 AM
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I think Netflix has some big battles ahead with the studios/content owners when it comes to streaming. After the Starz debacle, I expect studios to demand much more money from Netflix and I truly believe that Netflix will be forced to pay the piper and then significantly increase their streaming plans pricing. The days of Netflix getting uber cheap streaming deals are done.

That said, Netflix is not going anywhere. There are just not many alternatives that are viable (right now, that could change).
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Old 09-16-2011, 09:46 AM
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I will say that anyone who has a Blockbuster near them would be somewhat foolish not to switch to BB Online which offers, as far as I can tell, far more benefits than Netflix movie only.

For ages I've been considering going to Netflix, but it was entirely for the added benefits of the streaming portion of Netflix.

But, I have a BB a couple miles down the road.

What I get that Netflix DVD only can't give me or gives me the same:
1. 3 at a time BD or DVD for about $20 a month - unlimited
2. Every movie I get at home I can return to a store and check out a new movie right away.
3. No due dates on the 3-out-at-a-time plan, even on the in-store exchanges.
4. Free movie rental coupons for 'must have now' requirements.
5. Solid specials like free 99 cent in store rental with any in-store transaction. No kidding! I've been getting like 5+ movies EXTRA every week with zero cost to me.
6. Fast shipping times.
7. INSTANT return times. I don't wait for movies to return to a warehouse, they get checked in at the store, and my queue is updated before I get home.
8. Lots of movies available D&D without a waiting window.

Really, I understand why some people hate BB, but their online program has treated me extremely well for years now. I think it'll be good for Redbox and Netflix if BB stays open and keeps competing against them. Likewise, it'll be good for BB to have to adapt to what those companies throw out against them.
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Old 09-16-2011, 09:53 AM
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Quote:
Originally Posted by AV_Integrated View Post
I will say that anyone who has a Blockbuster near them would be somewhat foolish not to switch to BB Online which offers, as far as I can tell, far more benefits than Netflix movie only.

For ages I've been considering going to Netflix, but it was entirely for the added benefits of the streaming portion of Netflix.

But, I have a BB a couple miles down the road.

What I get that Netflix DVD only can't give me or gives me the same:
1. 3 at a time BD or DVD for about $20 a month - unlimited
2. Every movie I get at home I can return to a store and check out a new movie right away.
3. No due dates on the 3-out-at-a-time plan, even on the in-store exchanges.
4. Free movie rental coupons for 'must have now' requirements.
5. Solid specials like free 99 cent in store rental with any in-store transaction. No kidding! I've been getting like 5+ movies EXTRA every week with zero cost to me.
6. Fast shipping times.
7. INSTANT return times. I don't wait for movies to return to a warehouse, they get checked in at the store, and my queue is updated before I get home.
8. Lots of movies available D&D without a waiting window.

Really, I understand why some people hate BB, but their online program has treated me extremely well for years now. I think it'll be good for Redbox and Netflix if BB stays open and keeps competing against them. Likewise, it'll be good for BB to have to adapt to what those companies throw out against them.
Completely agree.

I switched over to BB as soon as I heard about the Netflix rate hikes. I hadn't even considered going back to Blockbuster after dumping them for netflix about 8 years ago or so.

I wish I would have done it earlier. Netflix is great for a cheap, 8 buck a month streaming option, but BB really kills them on disc rental services. Especially if you have a Blockbuster close by that can allow you to take advantage of the in-store trades. Anyone who is on a disc plan with netflix owes it to themselves to at least consider Blockbuster. Especially if all you are doing is getting blu rays from Netflix like I was. If you need deep, obscure dvd titles, then Blockbuster may not be for you. But if you are interested in primarily new release blu rays, they provide a superior service than Netflix.
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Old 09-16-2011, 10:00 AM
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Quote:
Originally Posted by ack_bak View Post
I think Netflix has some big battles ahead with the studios/content owners when it comes to streaming. After the Starz debacle, I expect studios to demand much more money from Netflix and I truly believe that Netflix will be forced to pay the piper and then significantly increase their streaming plans pricing. The days of Netflix getting uber cheap streaming deals are done.

That said, Netflix is not going anywhere. There are just not many alternatives that are viable (right now, that could change).
IMO, you are misjudging the greed of Hollywood studios. They can ask whatever they want . . . or think they should get for their content. But until someone steps up and pays a price - it is that price that becomes "market value." Sort of like a classic car auction. Your classic car isn't worth what you think it is. It is worth what someone is willing to pay for it. And that price could be substantially less.

What are people really expecting for $8 a month? Brand new movies just off home video? GMAFB. The Starz deal was a fluke. And it will be coming to an end.

So any subscriber that bitches and moans and says they are leaving - where are they going to go? Who is going to offer the same deal for the same money?
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