Netflix: We Hate Making Subscribers Upset (but Will Anyway)
Netflix: We Hate Making Subscribers Upset (but Will Anyway)
Posted 07/26/2011 at 7:26am
| by Paul Lilly
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Netflix acknowledged in its Q2 earnings report that its recent price hike will likely cause revenue to fall in the third quarter before rebounding in the fourth. Investors responded by feeding the hybrid DVD-by-mail/streaming movie service a heaping slice of humble pie in after hours trading, sending the company's sky-high stock price down more than 10 percent.
Revenue for the quarter ended June 30 was $789 million, which represents a 52 percent year-over-year increase, but is slightly below the $791 million figure analysts were expecting. Netflix said it grew its subscriber-base 70 percent from 15 million one year ago to 25.56 million global subscribers currently (24.59 million in the U.S.). Some of those customers were hoping Netflix would take a mulligan on its recent price hike, but that doesn't appear likely at this point.
"It is expected and unfortunate that our DVD subscribers who also use streaming don't like our price change, which can be as much as a 60 percent increase for them from $9.99 to $15.98, when it goes into effect for each subscriber upon their renewal date in September," Netflix said. "Some subscribers will cancel Netflix or downgrade their Netflix plans. We expect most to stay with us because each of our $7.99 plans is an incredible value. We hate making our subscribers upset with us, but we feel we provide a fantastic service and we're working hard to further improve the quality and range of our streaming content in Q4 and beyond."
On a conference call with investors, Netflix CEO Reed Hastings said "the noise level was actually less than we expected. Given a 60 percent increase, we knew what we were getting into," according to USA Today. In other words, don't hold your breath waiting for Netflix to reverse course, all you'll accomplish is turning from red to blue in the face.
Even with the investor backlash, Netflix probably isn't sweating bullets. The company is optimistic that Q4 could end up being its first billion dollar quarter, which would surely drive Netflix's stock right back up. In addition, Netflix said it's making "great progress" on integrating its service with Facebook and will likely launch it before its next earning report.
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Digital-Storm
July 26, 2011 at 11:27am
All the hatred on Netflix recently is getting a bit old. Boo hoo, you can't rent movies for even half the price of a local store anymore, and just put them in the mailbox when you're done watching it. The convenience... Netflix provides a far superior cost to entertainment than most games I pay 40+ dollars for. They even satisfied my inner Nerd by adding every episode of Star Trek, with Deep Space Nine coming in October. How much better can it get, hundreds of hours of Star Trek pleasure!
Caboose
July 26, 2011 at 12:40pm
Exactly. Its still a service that is leaps and bounds better than any On-Demand POS service that is offered by cable companies.
I've got no issues with the price increase. In fact, I'm going to be canceling my zip.ca subscription and doing all my movies through Netflix from now on. I can stream Netflix on my Wii, PS3, 360, Samsung Galaxy S phone, any laptop or desktop, and soon my Asus Eee Pad Transformer.
Prices increase people for services. Not much you can do about it.
aFineWayToDie
July 26, 2011 at 10:59am
Sorry Netflix, but recieving an email out of nowhere stating that you are increasing my subscription fee by 60% just because you can isn't my idea of customer service. The only reason I subscribe to a 1 DVD, unlimited instant viewing plan is because much of Netflix's library is unavailable for instant streaming. Many, if not most, of the new movies and TV shows I watch are entirely unavialable to watch instantly. Unless netflix is going to seriosuly increase the size of their instant streaming library, this is absolutely ridiculous.
DAPBENJAMIN
July 27, 2011 at 5:56am
I cannot agree more with this statement. This is the 2nd time I got a "our prices are going up so just accept it and pay up" email from Netflix.
I cancelled my service since I don't agree with this way of announcing price increases. Exceptionally arrogant!
BasiliskSt
July 26, 2011 at 8:57am
As a long-time Netflix user, I'm disinclined to give up the accumulated power of Netflix's rating system which is actually quite accurate in predictive quality for our family. I hope the new pricing policy gives Netflix the revenue to negotiate new deals for expanded offerings for watch instantly streaming. There's just too much that isn't currently available online. I definitely see streaming as the future, not hard media DVDs, but programming availability does have to grow for Netflix to succeed long-term.
Insurgence
July 26, 2011 at 8:00am
Because it had to happen. By seperating DVD and streaming they have more flexibility. I personally don't like the change, but I saw it comming, and it became more obvious as they started making more deals for streaming content. This allows them to focus cost where it needs to be, and will hopefully give them more power when it comes to making those deals.
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