19 ms·

Netflix loses 800,000 subscribers (stock drops 28%)

199 points by mikexstudios 15y ago

james33 15y ago
Wasn't Reed Hastings named CEO of the year last year? $300 to <$90 in around 4 months. Hmmmm....
- muhfuhkuh 15y ago
  To be absolutely fair, though, NFLX should in no way, shape, or form be worth anywhere near $300 a share. Even $50 is pushing it. I'd think settling somewhere between 30-40/shr. is a good premium. They have to have multiple pipelines of revenue aside from "streaming non-recent movies and tv shows." Here's a strategy they can try: If they can score some day-after-airing TV shows a la Hulu and have them available for 30 days, then moratorium to let the studios "monetize" the episodes in reruns and in syndication, then "re-release" them in streaming the entire season, that will be something. They can angle it to subscribers as their own personal "Tivo". They can pay content owners per viewing, as Spotify does with music publishers.
  - runako 15y ago
    > I'd think settling somewhere between 30-40/shr. is a good premium. $30-$40/share would give it a P/E multiple of between 7.5 and 10. Netflix has trailing 5-year EPS growth of around 35%. You may hate the company and the stock, but $30-$40/share would have it trading at a discount to other companies with similar growth histories. There's no case to be made for $40 being a premium for NFLX.
    - Yevgeny 15y ago
      In that case (trading on discount) you are better suited utilizing one of several options trading strategies...
gkoberger 15y ago
I feel bad for Netflix. They're between a rock and a hard place. The content providers want more money and eventually want to cut out the middleman. The users balk when the price is raised, even though unlimited streaming and DVDs for a month still cost less than a decent meal. And every decision they make (like Qwikster, which was likely done so they didn't have to pay content providers a fee for users who weren't streaming) is bashed and mocked.
- badclient 15y ago
  still cost less than a decent meal So many great things on the web cost less than a single cup of Starbucks. Yet, I myself am so hesitant to pay for them. On my landing pages I design at work, I'm increasingly trying to communicate this via comparisons("less than a morning Starbucks trip"). Another one is showing a dollar bill to communicate that for less than a dollar a day, they will get _____. For a service that we were charging $10, we had 3% conversion rate. Then I showed an actual picture of a $10 bill to show how inexpensive this is and we doubled conversion to 6%. I increased the price to $30 and showed a one dollar bill, an equal sign, and what they would get for a dollar a day. The conversion rate is 3%. Overall, we make $30 more per 100 uniques to that page than at $10 price(we make $60 at 10, $90 at 30). It seems promising though not totally conclusive in terms of increasing conversion rates. The point is, spending a dollar on the web to me seems much more difficult than spending a buck on a Crunch bar. The efforts of my landing page experiments are to align online spend perception with retail. (numbers rounded to nearest % for purpose of this post)
  - sliverstorm 15y ago
    This says things about the prices at Starbucks as much as it says things about the web. :) Also, with food, even if it is terrible you can still eat it. It's a no/little risk investment.
    - eropple 15y ago
      even if it is terrible you can still eat it I see you've never been to Friendly's.
mikexstudios 15y ago
Also, link to Netflix's Q3 Investor Letter, which is a good read: http://news.ycombinator.com/item?id=3151463 http://news.ycombinator.com/item?id=3151463
agildehaus 15y ago
Poor site redesign followed by a price hike followed by a pointless attempt at splitting up the company. Not surprised.
- tadfisher 15y ago
  There was, most definitely, a point to splitting up the company. It just wasn't communicated effectively or presented at all in a positive light.
- pacomerh 15y ago
  Indeed, the way movie covers scroll is really frustrating.
- jdludlow 15y ago
  The price hike didn't bother me. The company split would be annoying, but not the end of the world. It's the terrible UI design of the new site that has me looking for alternatives. It's so bad. Do they actually think that this UI is functional, or is there some kind of internal fear to question it?
  - CamperBob 15y ago
    The whole redesign seemed engineered to hide the fact that they would be offering less content going forward. That's when I hit the 'sell' button, personally.
martythemaniak 15y ago
Honestly curious, where did those users go? Back to $40 shitcable? Torrenting?
- bittermang 15y ago
  In my case, I simply went without. Contrary to the way people seem to act, entertainment is neither a right, or a requirement. I get by just fine without movies or television shows.
  - megablast 15y ago
    Fair enough, but you could tell us what you do that you didn't used to. I ride more, play board games, and read more.
- singer 15y ago
  If they are like me, they didn't use Netflix much and it just became an unnecessary expense. For those who use Netflix on a daily basis, I think the new price is still fair.
  - baddox 15y ago
    I'm guessing that's most of it: people with disposable income that were paying but not using, simply because they never bothered to cancel. All the news about the price hikes brought the small monthly expense to the attention of these people, and even though most could afford the higher price, it was just the nudge they needed to cancel a service they rarely use.
- phallstrom 15y ago
  We had the 1 dvd at a time (+ blu ray option). So, for us the price jump was close to double. Our last DVD sat on the shelf for 3 months before we got to it. But we watch streaming a lot. So we canceled the DVD option and figure that $8-9/mo we'll use at the redbox near us if there's something recent we want to watch. That's more movies than we can watch anyway (or that we can get via netflix with the mail delay)... I'm sure a lot of the 800,000 were like us.
ShabbyDoo 15y ago
So, Netflix increased prices by a pretty high percentage and managed to lose only four percent of subscribers? This is astoundingly impressive. Furthermore, many of these deflections might simply be the result of forcing subscribers to explicitly choose to continue service. How many people kept paying a few dollars per month for a service which they did not use and, when forced to choose a new plan, opted out?
- esrauch 15y ago
  > So, Netflix increased prices by a pretty high percentage and ... Except I have netflix and I am paying no more than I used to, and I don't think that my situation is unusual. The percentage of people who were impacted at all by the price change that chose to discontinue service is some number larger than 4%.
- Klinky 15y ago
  Four percent in a single quarter is huge, especially if it reverses a consistent growth trend. Starz will be going away in Feb 2012, a few months from now. Dreamworks will not be coming online until 2013. Thinking Netflix's stumblings have been completely contained within the last quarter may be a bit foolhardy.
- gdulli 15y ago
  By their own estimates, 800,000 subscribers was only the start of the bleeding. If you read the article, it says they forecast losing up to 1.5 million streaming customers and up to 2.7 million DVD subscribers in the next quarter.
mark_l_watson 15y ago
So, they lost 3 to 4% of their customers - that is not good. That said, my wife and I each have our own streaming accounts and I also have blu-ray delivery on my account, and Netflix is not losing our business: we really like the service. Also, with their price increases, I don't understand why the stock took such a big hit.
- aero142 15y ago
  My 2c. Netflix was trading near a 40 P/E. This usually implies that the stock price is based on a belief about a huge future growth and that they would continue adding large numbers of subscribers every month. When they reversed the trend, they could no longer justify a high P/E, so the stock switched to be priced as a slow growth and riskier stock at a lower P/E.
- sukuriant 15y ago
  Fear, Uncertainty, Doubt. I expect it to climb back, and will probably be putting money into it when the panic settles.
- AJ007 15y ago
  Curiously while this news is bad for Netflix it is really really bad for someone else: cable & satellite TV providers. Customers now expect to be able to watch whatever the heck they want for about $10 a month. While I don't fit in that category, I do expect to watch whatever the heck I want. I no longer have any tolerance for television commercials or waiting until next week for a new tv episode (might as well wait until its over and watch the whole season.)
unfletch 15y ago
I wonder if this includes customers who've put their account "on hold" rather than canceling. My wife decided she didn't need it anymore, but may someday want to go back. She's effectively cancelled, but the account still exists in their database.
pkamb 15y ago
I'd prefer having less total movies for streaming if they cut out all the B-movie crap. Or give us a [never ever ever show this again] button.
- chadgeidel 15y ago
  I would pay for the "don't show me this again, ever" button.
  - tedunangst 15y ago
    Does rating a movie "Not interested" not accomplish that?
    - chadgeidel 15y ago
      Unfortunately no. Netflix has been recommending "Hitch" with Will Smith since I've been a member. 8*(
      - enemieslist 15y ago
        The greatest scientific minds of your generation have determined that you will probably love "Hitch" starring Will Smith. Submit to the inevitability of getting Hitched.
HaloZero 15y ago
I have friends who were outraged at Netflix price increase. And I mean serious outrage. I did notice that the ones who were really outraged are running tight on money. One of them works and goes to school full time so an extra $8/month after tuition, rent, even though it's marginal seems like a LOT and for no additional benefit.
- Klinky 15y ago
  I think a lot of the outrage came from people learning about the price increase, learning that Starz was going away & then on top of that learning that Netflix was going to destroy the convenience aspect by separating the services. Regardless of the costs, it just seems like Netflix kept eroding the value of their service while asking more for it. Plus how they relayed this information seemed like a mix between condescending & manic.
- sage_joch 15y ago
  Outrage seems like a funny response to a price increase for a no-lock-in, non-essential entertainment service.
  - HaloZero 15y ago
    Yeah, that's what I said. People take stuff for granted sometimes.
- jayzee 15y ago
  I canceled my subscription. Not because of the price increase but the cavalier manner in which the increase was communicated. The presumptuous email re: the increase really pissed me off. It has also made more more careful with communications with our user-base.
dr_ 15y ago
Hastings should have stayed the course with his decision. Can't just impulsively react to every analysts opinion and run your company that way. Raise prices as needed, you will lose subscribers in the short run but in the longer run you will hopefully keep providing better content and will then start gaining subscribers. They also maybe should have made a play for Hulu.
- jxcole 15y ago
  I actually respect the CEO very much who realizes he has made a wrong decision and backs away from it. It shows the type of humility that almost no one in that position has. Furthermore, companies exist to make customers happy, so if the customers were unhappy from this decision I can hardly blame him for reversing it.
0x12 15y ago
That leaves 23.8 million, and even though you might do weird extrapolations and predict they're gone in 2.5 years tops in reality it is amazing that they managed to do this and only lose a percentage that small. Given that the majority of the 'leaves' will do this right at the front the next quarter will give you an idea if this is going to be the end of Netflix or whether they just managed to substantially improve their margins. I think it is too early to call.
sudonim 15y ago
I was looking at purchasing shares in Netflix the first time the stock dropped. I believe at that time netflix was trading at 35x earnings. At the close today it was 30x earnings and now even lower in after hours trading. I never bought the shares because of the high multiple. However, I believe the current bad news is a blip on the radar in what will continue to be a tremendously successful company. Can someone explain if I'm evaluating Netflix wrong? Others seem all over the map: Apple trades at 14.6x earnings Amazon trades at 105x earnings Microsoft trades at 9.87x earnings
- hkmurakami 15y ago
  P/E ratio is one representation of how the market sees the company growing in the future. It's honestly an "emotional" number. While Apple continues to defy the pundits, it _is_ difficult to see their profits become, say, 5x over the next ten years (since they already rake in $100B+ in revenue). Also, one could legitimately argue that Apple has real competitors in every business they are involved in (PC makers, Android, Samsung, HTC, etc), and that their markets are inherently saturated (of course, one can argue otherwise too). Meanwhile, I suppose people see more growth potential in Amazon, because the ebook market itself is still growing, and their EC2 service is coinciding with the growth of hosted deployment of services. At the least, I can see how it's easier to trick yourself into thinking Amazon will have a stronger growth trajectory (it probably helps that Amazon's revenues are somewhat smaller at ~$30B). It also helps that Amazon has become a monopoly in their core business of online retail (with perhaps ebay being its main competitor), and application hosting seems (to me) a duopoly between EC2 and Rackspace.
- tomkarlo 15y ago
  P/E is only one metric and it's potentially very deceptive. You're using a PE that's uncorrected for expenses that are essentially investment in future business growth rather than a fundamental part of the business model. Amazon, for example, is hiring tons of new employees to build out its AWS business; that's a positive sign (it shows they believe that's a good investment) but in the short term it will drive down their earnings, because the cost of those employees is incurred now in exchange for business in future years. So with Amazon, you have a denominator that's growing, and a numerator that's depressed by the investment in growth. That results in a very high PE. MSFT and Apple, by comparison, are great companies but the market isn't expecting them to grow a lot (esp given how big they already are.) They're priced at a level where the market basically expects their earnings to stay steady going forward. 30X earnings is still not cheap for a tech company. It's in a spot where you'd have to look at the growth prospects, etc. to decide if it's a good deal. PE makes the most sense if you're comparing very mature companies with similar size, growth and operating metrics. If that's not the case, it's not very useful.
arnoldwh 15y ago
In general, I question the "network effect" and how strong it really is here in this industry. People always say that in an ideal world you'd have only one provider for streaming movies, but I actually see this going the other way...as in multiple providers (e.g. HBO) that stream their own content. I don't think this affects the user experience as meaningfully as people claim. I think people in general are used to multiple providers and are much more willing to accept it. Just look at how many apps people have on their iPhone. Plus it's just a lot easier to play with the content providers in a more vertically integrated model. One path that I would wish Netflix to keep going down is becoming a distribution channel for foreign movies.
r0fl 15y ago
How is the CEO not out of a job yet?
- sabat 15y ago
  Legit question, regardless of the downvotes. The answer, as far as I can see, is that founder and CEO Reed Hastings still has enough clout and power within the organization and its board that he can hold onto his position. However, he's got a lot of repair work to do, and I think he knows it.
botolo 15y ago
It is really incredible how the things are going for Netflix. Three/four months ago I was discussing with my father about shares he wanted to buy. He was losing some money on RIMM and I suggested him to buy Netflix, telling him: "Hey dad, they have the control of the streaming offer online and they are heading where the future is...no more DVDs, all streaming". I was lucky that my father did not follow my advice (otherwise he would have killed me, eheh) and now I see the problem. As a subscriber of their streaming service, it is always very difficult for me to find something interesting in their catalog. I am also a subscriber of Hulu and I use Hulu daily for all my TV shows needs. When I want to watch a movie, Netflix does not offer me anything interesting, Hulu does not have a big catalog and I end up getting DVDs from Red Box.
mehwoot 15y ago
Uh, isn't that only domestic subscribers? Looks like internationally they gained 510,000 over that period, making it net 300,000 loss.
amandalim89 15y ago
This shows that when consumers band together they can make a difference in corporate America. I wish we were more united in standing up against other products that are, 1.environmentally unfriendly (petrol) 2.abusive (child labor in Nike Sweatshops) 3.cruelty to animals (chicken farms) Sadly, I think most consumers only united when it's hurting their pockets. Otherwise, they turn a blind eye.
padobson 15y ago
cookiecaper is on to something when he says that Netflix needs to offer a white label service - but it goes deeper than that, and there is one very stupid road block to seeing it happen. In order to obfuscate the entire business model and tie up legal battles, content providers consider streams to an iPhone, an Android device, a PC, a Mac, a PS3, a blu-ray player, and an internet TV to be completely different services - and the content providers want different rates and pricing to each device. A stream is a stream is a stream is a stream! (...imho) This is the major reason that Netflix hasn't yet been able provide an open streaming API and the real reason TV hasn't seen the explosive changes that music and mobile phones have seen over the past 15 years. Almost all video services feel ancient when you're watching them - the user experience is marginally better or improved over what our grandparents were watching 50 years ago. Where is the bottom line streaming my Twitter lists relative to the genre I'm watching? Where is the onscreen chat with my wife when we're in different cities when our favorite show is on? Where are the annotations on movies from friends, celebrities, and critics? What did my favorite sports writer think of the last play? Why is the biggest screen in the house so dull? Why can't I buy once and play anywhere? TV can and should be so much more, but content providers would want $2/user for every incarnation of each feature I described above - because to them, a stream isn't just a stream isn't just a stream isn't just a stream.
f7u12 15y ago
I vowed never to use Netflix again when I realized they cancel your subscription instantly instead of giving you the month you pay for (a la WoW or any other properly run service). I also take every opportunity to bad mouth them for this awful business practice. Yeah, it's in the terms, but it's shit.
EugeneG 15y ago
Their main competitive advantage was their physical delivery infrastructure, which is very hard to replicate. If the DVD business dies slowly (as Hastings said it will) and is replaced by streaming, they are left with no competitive advantage. There is a good many companies that have the infrastructure to stream a large amount of video content (Amazon, Google, Akamai, etc). All of these companies will lack any competitive advantage , and will be squeezed to the last cent by the content providers, leaving them with just enough cash to run their infrastructure. This doesn't sound like a great business model.
- ericb 15y ago
  I would argue their presence on millions of DVD players and gaming platforms is now a solid competitive advantage. There are only two streaming services on my blu ray player, and netflix is one of them.
herbivore 15y ago
I am always amazed to hear that Netflix customers are outraged (!) by having to pay a whopping $10 to receive unlimited access to online streaming on demand. Really, if you can't afford $10 to sit infront of the TV and watch movies all day long, maybe you should get out there and find a real job instead of sitting on the couch.
lien 15y ago
why am i not surprised? a huge price hike in the middle of a struggling economy. I do feel bad for Netflix and i hope they recover. it was just a one-time bad business decision behind a great brand name. what a costly learning lesson for the ceo!
melvinng 15y ago
Netflix loses 800,000 subscribers = Piracy gains 1,000,000 subscribers
Mordor 15y ago
CEO sounds like an idiot, unlike his customers.
xutopia 15y ago
People seem to look at this and see it if Netflix would not survive this. The difference between Netflix and cable companies is that Netflix doesn't tie you into a 2 year contract. Try cancelling your cable as fast as you can with Netflix. The reality is that cable companies are starting to suffer from Netflix and the likes of it. Their slower decline will come to a surprise to many.
spinchange 15y ago
Sorry if this is OT/ a foolish question, but has the content available from Netflix Instant also gotten worse recently? I have a subscription but am not really the person who uses it at home and for the fist time in ages tried using it last night and couldn't find the movie I wanted, the "instead of" recommendations were ridiculous, and all the "new releases" were just totally lackluster. Have I missed something else beside the Qwikster debacle? Or is what it's showing me algorithmically based on what my wife and kids are watching? If not, I can see why people are canceling in droves.

199 points by mikexstudios 15y ago

james33 15y ago

Wasn't Reed Hastings named CEO of the year last year? $300 to <$90 in around 4 months. Hmmmm....

muhfuhkuh 15y ago
To be absolutely fair, though, NFLX should in no way, shape, or form be worth anywhere near $300 a share. Even $50 is pushing it. I'd think settling somewhere between 30-40/shr. is a good premium. They have to have multiple pipelines of revenue aside from "streaming non-recent movies and tv shows." Here's a strategy they can try: If they can score some day-after-airing TV shows a la Hulu and have them available for 30 days, then moratorium to let the studios "monetize" the episodes in reruns and in syndication, then "re-release" them in streaming the entire season, that will be something. They can angle it to subscribers as their own personal "Tivo". They can pay content owners per viewing, as Spotify does with music publishers.
- runako 15y ago
  > I'd think settling somewhere between 30-40/shr. is a good premium. $30-$40/share would give it a P/E multiple of between 7.5 and 10. Netflix has trailing 5-year EPS growth of around 35%. You may hate the company and the stock, but $30-$40/share would have it trading at a discount to other companies with similar growth histories. There's no case to be made for $40 being a premium for NFLX.
  - Yevgeny 15y ago
    In that case (trading on discount) you are better suited utilizing one of several options trading strategies...

gkoberger 15y ago

I feel bad for Netflix. They're between a rock and a hard place. The content providers want more money and eventually want to cut out the middleman. The users balk when the price is raised, even though unlimited streaming and DVDs for a month still cost less than a decent meal. And every decision they make (like Qwikster, which was likely done so they didn't have to pay content providers a fee for users who weren't streaming) is bashed and mocked.

badclient 15y ago
still cost less than a decent meal So many great things on the web cost less than a single cup of Starbucks. Yet, I myself am so hesitant to pay for them. On my landing pages I design at work, I'm increasingly trying to communicate this via comparisons("less than a morning Starbucks trip"). Another one is showing a dollar bill to communicate that for less than a dollar a day, they will get _____. For a service that we were charging $10, we had 3% conversion rate. Then I showed an actual picture of a $10 bill to show how inexpensive this is and we doubled conversion to 6%. I increased the price to $30 and showed a one dollar bill, an equal sign, and what they would get for a dollar a day. The conversion rate is 3%. Overall, we make $30 more per 100 uniques to that page than at $10 price(we make $60 at 10, $90 at 30). It seems promising though not totally conclusive in terms of increasing conversion rates. The point is, spending a dollar on the web to me seems much more difficult than spending a buck on a Crunch bar. The efforts of my landing page experiments are to align online spend perception with retail. (numbers rounded to nearest % for purpose of this post)
- sliverstorm 15y ago
  This says things about the prices at Starbucks as much as it says things about the web. :) Also, with food, even if it is terrible you can still eat it. It's a no/little risk investment.
  - eropple 15y ago
    even if it is terrible you can still eat it I see you've never been to Friendly's.

mikexstudios 15y ago

Also, link to Netflix's Q3 Investor Letter, which is a good read: http://news.ycombinator.com/item?id=3151463 http://news.ycombinator.com/item?id=3151463

agildehaus 15y ago

Poor site redesign followed by a price hike followed by a pointless attempt at splitting up the company. Not surprised.

tadfisher 15y ago
There was, most definitely, a point to splitting up the company. It just wasn't communicated effectively or presented at all in a positive light.
pacomerh 15y ago
Indeed, the way movie covers scroll is really frustrating.
jdludlow 15y ago
The price hike didn't bother me. The company split would be annoying, but not the end of the world. It's the terrible UI design of the new site that has me looking for alternatives. It's so bad. Do they actually think that this UI is functional, or is there some kind of internal fear to question it?
- CamperBob 15y ago
  The whole redesign seemed engineered to hide the fact that they would be offering less content going forward. That's when I hit the 'sell' button, personally.

martythemaniak 15y ago

Honestly curious, where did those users go? Back to $40 shitcable? Torrenting?

bittermang 15y ago
In my case, I simply went without. Contrary to the way people seem to act, entertainment is neither a right, or a requirement. I get by just fine without movies or television shows.
- megablast 15y ago
  Fair enough, but you could tell us what you do that you didn't used to. I ride more, play board games, and read more.
singer 15y ago
If they are like me, they didn't use Netflix much and it just became an unnecessary expense. For those who use Netflix on a daily basis, I think the new price is still fair.
- baddox 15y ago
  I'm guessing that's most of it: people with disposable income that were paying but not using, simply because they never bothered to cancel. All the news about the price hikes brought the small monthly expense to the attention of these people, and even though most could afford the higher price, it was just the nudge they needed to cancel a service they rarely use.
phallstrom 15y ago
We had the 1 dvd at a time (+ blu ray option). So, for us the price jump was close to double. Our last DVD sat on the shelf for 3 months before we got to it. But we watch streaming a lot. So we canceled the DVD option and figure that $8-9/mo we'll use at the redbox near us if there's something recent we want to watch. That's more movies than we can watch anyway (or that we can get via netflix with the mail delay)... I'm sure a lot of the 800,000 were like us.

ShabbyDoo 15y ago

So, Netflix increased prices by a pretty high percentage and managed to lose only four percent of subscribers? This is astoundingly impressive. Furthermore, many of these deflections might simply be the result of forcing subscribers to explicitly choose to continue service. How many people kept paying a few dollars per month for a service which they did not use and, when forced to choose a new plan, opted out?

esrauch 15y ago
> So, Netflix increased prices by a pretty high percentage and ... Except I have netflix and I am paying no more than I used to, and I don't think that my situation is unusual. The percentage of people who were impacted at all by the price change that chose to discontinue service is some number larger than 4%.
Klinky 15y ago
Four percent in a single quarter is huge, especially if it reverses a consistent growth trend. Starz will be going away in Feb 2012, a few months from now. Dreamworks will not be coming online until 2013. Thinking Netflix's stumblings have been completely contained within the last quarter may be a bit foolhardy.
gdulli 15y ago
By their own estimates, 800,000 subscribers was only the start of the bleeding. If you read the article, it says they forecast losing up to 1.5 million streaming customers and up to 2.7 million DVD subscribers in the next quarter.

mark_l_watson 15y ago

So, they lost 3 to 4% of their customers - that is not good. That said, my wife and I each have our own streaming accounts and I also have blu-ray delivery on my account, and Netflix is not losing our business: we really like the service. Also, with their price increases, I don't understand why the stock took such a big hit.

aero142 15y ago
My 2c. Netflix was trading near a 40 P/E. This usually implies that the stock price is based on a belief about a huge future growth and that they would continue adding large numbers of subscribers every month. When they reversed the trend, they could no longer justify a high P/E, so the stock switched to be priced as a slow growth and riskier stock at a lower P/E.
sukuriant 15y ago
Fear, Uncertainty, Doubt. I expect it to climb back, and will probably be putting money into it when the panic settles.
AJ007 15y ago
Curiously while this news is bad for Netflix it is really really bad for someone else: cable & satellite TV providers. Customers now expect to be able to watch whatever the heck they want for about $10 a month. While I don't fit in that category, I do expect to watch whatever the heck I want. I no longer have any tolerance for television commercials or waiting until next week for a new tv episode (might as well wait until its over and watch the whole season.)

unfletch 15y ago

I wonder if this includes customers who've put their account "on hold" rather than canceling. My wife decided she didn't need it anymore, but may someday want to go back. She's effectively cancelled, but the account still exists in their database.

pkamb 15y ago

I'd prefer having less total movies for streaming if they cut out all the B-movie crap. Or give us a [never ever ever show this again] button.

chadgeidel 15y ago
I would pay for the "don't show me this again, ever" button.
- tedunangst 15y ago
  Does rating a movie "Not interested" not accomplish that?
  - chadgeidel 15y ago
    Unfortunately no. Netflix has been recommending "Hitch" with Will Smith since I've been a member. 8*(
    - enemieslist 15y ago
      The greatest scientific minds of your generation have determined that you will probably love "Hitch" starring Will Smith. Submit to the inevitability of getting Hitched.

HaloZero 15y ago

I have friends who were outraged at Netflix price increase. And I mean serious outrage. I did notice that the ones who were really outraged are running tight on money. One of them works and goes to school full time so an extra $8/month after tuition, rent, even though it's marginal seems like a LOT and for no additional benefit.

Klinky 15y ago
I think a lot of the outrage came from people learning about the price increase, learning that Starz was going away & then on top of that learning that Netflix was going to destroy the convenience aspect by separating the services. Regardless of the costs, it just seems like Netflix kept eroding the value of their service while asking more for it. Plus how they relayed this information seemed like a mix between condescending & manic.
sage_joch 15y ago
Outrage seems like a funny response to a price increase for a no-lock-in, non-essential entertainment service.
- HaloZero 15y ago
  Yeah, that's what I said. People take stuff for granted sometimes.
jayzee 15y ago
I canceled my subscription. Not because of the price increase but the cavalier manner in which the increase was communicated. The presumptuous email re: the increase really pissed me off. It has also made more more careful with communications with our user-base.

dr_ 15y ago

Hastings should have stayed the course with his decision. Can't just impulsively react to every analysts opinion and run your company that way. Raise prices as needed, you will lose subscribers in the short run but in the longer run you will hopefully keep providing better content and will then start gaining subscribers. They also maybe should have made a play for Hulu.

jxcole 15y ago
I actually respect the CEO very much who realizes he has made a wrong decision and backs away from it. It shows the type of humility that almost no one in that position has. Furthermore, companies exist to make customers happy, so if the customers were unhappy from this decision I can hardly blame him for reversing it.

0x12 15y ago

That leaves 23.8 million, and even though you might do weird extrapolations and predict they're gone in 2.5 years tops in reality it is amazing that they managed to do this and only lose a percentage that small. Given that the majority of the 'leaves' will do this right at the front the next quarter will give you an idea if this is going to be the end of Netflix or whether they just managed to substantially improve their margins. I think it is too early to call.

sudonim 15y ago

I was looking at purchasing shares in Netflix the first time the stock dropped. I believe at that time netflix was trading at 35x earnings. At the close today it was 30x earnings and now even lower in after hours trading. I never bought the shares because of the high multiple. However, I believe the current bad news is a blip on the radar in what will continue to be a tremendously successful company. Can someone explain if I'm evaluating Netflix wrong? Others seem all over the map: Apple trades at 14.6x earnings Amazon trades at 105x earnings Microsoft trades at 9.87x earnings

hkmurakami 15y ago
P/E ratio is one representation of how the market sees the company growing in the future. It's honestly an "emotional" number. While Apple continues to defy the pundits, it _is_ difficult to see their profits become, say, 5x over the next ten years (since they already rake in $100B+ in revenue). Also, one could legitimately argue that Apple has real competitors in every business they are involved in (PC makers, Android, Samsung, HTC, etc), and that their markets are inherently saturated (of course, one can argue otherwise too). Meanwhile, I suppose people see more growth potential in Amazon, because the ebook market itself is still growing, and their EC2 service is coinciding with the growth of hosted deployment of services. At the least, I can see how it's easier to trick yourself into thinking Amazon will have a stronger growth trajectory (it probably helps that Amazon's revenues are somewhat smaller at ~$30B). It also helps that Amazon has become a monopoly in their core business of online retail (with perhaps ebay being its main competitor), and application hosting seems (to me) a duopoly between EC2 and Rackspace.
tomkarlo 15y ago
P/E is only one metric and it's potentially very deceptive. You're using a PE that's uncorrected for expenses that are essentially investment in future business growth rather than a fundamental part of the business model. Amazon, for example, is hiring tons of new employees to build out its AWS business; that's a positive sign (it shows they believe that's a good investment) but in the short term it will drive down their earnings, because the cost of those employees is incurred now in exchange for business in future years. So with Amazon, you have a denominator that's growing, and a numerator that's depressed by the investment in growth. That results in a very high PE. MSFT and Apple, by comparison, are great companies but the market isn't expecting them to grow a lot (esp given how big they already are.) They're priced at a level where the market basically expects their earnings to stay steady going forward. 30X earnings is still not cheap for a tech company. It's in a spot where you'd have to look at the growth prospects, etc. to decide if it's a good deal. PE makes the most sense if you're comparing very mature companies with similar size, growth and operating metrics. If that's not the case, it's not very useful.

arnoldwh 15y ago

In general, I question the "network effect" and how strong it really is here in this industry. People always say that in an ideal world you'd have only one provider for streaming movies, but I actually see this going the other way...as in multiple providers (e.g. HBO) that stream their own content. I don't think this affects the user experience as meaningfully as people claim. I think people in general are used to multiple providers and are much more willing to accept it. Just look at how many apps people have on their iPhone. Plus it's just a lot easier to play with the content providers in a more vertically integrated model. One path that I would wish Netflix to keep going down is becoming a distribution channel for foreign movies.

r0fl 15y ago

How is the CEO not out of a job yet?

sabat 15y ago
Legit question, regardless of the downvotes. The answer, as far as I can see, is that founder and CEO Reed Hastings still has enough clout and power within the organization and its board that he can hold onto his position. However, he's got a lot of repair work to do, and I think he knows it.

botolo 15y ago

It is really incredible how the things are going for Netflix. Three/four months ago I was discussing with my father about shares he wanted to buy. He was losing some money on RIMM and I suggested him to buy Netflix, telling him: "Hey dad, they have the control of the streaming offer online and they are heading where the future is...no more DVDs, all streaming". I was lucky that my father did not follow my advice (otherwise he would have killed me, eheh) and now I see the problem. As a subscriber of their streaming service, it is always very difficult for me to find something interesting in their catalog. I am also a subscriber of Hulu and I use Hulu daily for all my TV shows needs. When I want to watch a movie, Netflix does not offer me anything interesting, Hulu does not have a big catalog and I end up getting DVDs from Red Box.

mehwoot 15y ago

Uh, isn't that only domestic subscribers? Looks like internationally they gained 510,000 over that period, making it net 300,000 loss.

amandalim89 15y ago

This shows that when consumers band together they can make a difference in corporate America. I wish we were more united in standing up against other products that are, 1.environmentally unfriendly (petrol) 2.abusive (child labor in Nike Sweatshops) 3.cruelty to animals (chicken farms) Sadly, I think most consumers only united when it's hurting their pockets. Otherwise, they turn a blind eye.

padobson 15y ago

cookiecaper is on to something when he says that Netflix needs to offer a white label service - but it goes deeper than that, and there is one very stupid road block to seeing it happen. In order to obfuscate the entire business model and tie up legal battles, content providers consider streams to an iPhone, an Android device, a PC, a Mac, a PS3, a blu-ray player, and an internet TV to be completely different services - and the content providers want different rates and pricing to each device. A stream is a stream is a stream is a stream! (...imho) This is the major reason that Netflix hasn't yet been able provide an open streaming API and the real reason TV hasn't seen the explosive changes that music and mobile phones have seen over the past 15 years. Almost all video services feel ancient when you're watching them - the user experience is marginally better or improved over what our grandparents were watching 50 years ago. Where is the bottom line streaming my Twitter lists relative to the genre I'm watching? Where is the onscreen chat with my wife when we're in different cities when our favorite show is on? Where are the annotations on movies from friends, celebrities, and critics? What did my favorite sports writer think of the last play? Why is the biggest screen in the house so dull? Why can't I buy once and play anywhere? TV can and should be so much more, but content providers would want $2/user for every incarnation of each feature I described above - because to them, a stream isn't just a stream isn't just a stream isn't just a stream.

f7u12 15y ago

I vowed never to use Netflix again when I realized they cancel your subscription instantly instead of giving you the month you pay for (a la WoW or any other properly run service). I also take every opportunity to bad mouth them for this awful business practice. Yeah, it's in the terms, but it's shit.

EugeneG 15y ago

Their main competitive advantage was their physical delivery infrastructure, which is very hard to replicate. If the DVD business dies slowly (as Hastings said it will) and is replaced by streaming, they are left with no competitive advantage. There is a good many companies that have the infrastructure to stream a large amount of video content (Amazon, Google, Akamai, etc). All of these companies will lack any competitive advantage , and will be squeezed to the last cent by the content providers, leaving them with just enough cash to run their infrastructure. This doesn't sound like a great business model.

ericb 15y ago
I would argue their presence on millions of DVD players and gaming platforms is now a solid competitive advantage. There are only two streaming services on my blu ray player, and netflix is one of them.

herbivore 15y ago

I am always amazed to hear that Netflix customers are outraged (!) by having to pay a whopping $10 to receive unlimited access to online streaming on demand. Really, if you can't afford $10 to sit infront of the TV and watch movies all day long, maybe you should get out there and find a real job instead of sitting on the couch.

lien 15y ago

why am i not surprised? a huge price hike in the middle of a struggling economy. I do feel bad for Netflix and i hope they recover. it was just a one-time bad business decision behind a great brand name. what a costly learning lesson for the ceo!

melvinng 15y ago

Netflix loses 800,000 subscribers = Piracy gains 1,000,000 subscribers

Mordor 15y ago

CEO sounds like an idiot, unlike his customers.

xutopia 15y ago

People seem to look at this and see it if Netflix would not survive this. The difference between Netflix and cable companies is that Netflix doesn't tie you into a 2 year contract. Try cancelling your cable as fast as you can with Netflix. The reality is that cable companies are starting to suffer from Netflix and the likes of it. Their slower decline will come to a surprise to many.

spinchange 15y ago

Sorry if this is OT/ a foolish question, but has the content available from Netflix Instant also gotten worse recently? I have a subscription but am not really the person who uses it at home and for the fist time in ages tried using it last night and couldn't find the movie I wanted, the "instead of" recommendations were ridiculous, and all the "new releases" were just totally lackluster. Have I missed something else beside the Qwikster debacle? Or is what it's showing me algorithmically based on what my wife and kids are watching? If not, I can see why people are canceling in droves.