Netflix Expects to Lose 1 Million Subscribers as Price Hike Takes Effect

Paul Lilly

Netflix today told shareholders that it's slashing its domestic subscriber guidance by 1 million customers as the company's restructured subscription plans and new pricing go into effect. Projections for the third quarter now sit at 24 million, representing a 4 percent slide and enough to spook investors into selling off shares.

According to The Wall Street Journal , news of the revised guidance sent shares tumbling 15 percent to the lowest the stock has been in 2011. However, there's a bit of silver lining for investors who choose to ride the current wave of uncertainty, as Netflix didn't alter its financial guidance for the quarter.

Netflix caused a stir on the Internet two months ago when it announced plans to split its DVD-by-mail and streaming services, effectively jacking up the price for those who wish to continue subscribing to both. Despite the consumer backlash and expected loss of 1 million subscribers, Netflix is steadfast that this was a good decision.

"We remain convinced that the splitting of services was the right long-term strategic choice," Netlix said in a note to investors. "We know our decision to split our services has upset many of our subscribers, which we don't take lightly, but we believe this split will help us make our services better for subscribers and shareholders for years to come."

Netflix has a long read ahead of it. As All Things D points out, Netflix's stock traded at a high of nearly $300 just before the surprise announcement, and is now down below $200.

Netflix Q3 2011 Guidance Update (PDF)

Image Credit: Netflix

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