It seemed like Netflix had it all not all that long ago. A thriving DVD-by-mail rental business, a streaming service that grew more popular than movie studios anticipated, and for the most part, happy subscribers. All that was before Netflix shot itself in the foot with a laser guided cannon, and it's been hopping awkwardly ever since. Watching Netflix stumble around isn't the kind of thing that leads to investor confidence, nor is warning that the worst might be yet to come.
Quick refresher in case you've been living under a boulder in recent months. Everything was going fine for Netflix until it announced a price hike along with plans to sever its DVD rental arm into its own business called Qwikster. Worse yet, Qwikster was going to operate 100 percent separately, so if you planned on keeping both DVDs and streaming, you would have had to manage two separate queues on two different websites with two separate charges to your credit card. None of that sat well with subscribers, who took their virtual pitchforks and torches to the Internet to rage their, well, rage. Netflix eventually reversed course and has been reeling ever since.
In a recent SEC filing , Netflix may have shot its other foot by by warning of possible gloom and doom.
"The consumer reaction to the price change, and to a lesser degree, the branding announcement, was very negative, leading to significant customer cancellations and a decline in gross subscriber additions. We subsequently retracted our plans to rebrand our DVD by mail service and separate the DVD by mail and streaming websites. If we do not reverse the negative consumer sentiment toward our brand and if we continue to experience significant customer cancellations and a decline in subscriber additions, our results of operations including our cash flow will be adversely impacted," Netflix told the SEC.
Netflix more recently warned of a loss for 2012, sending shares down by as much as 7 percent on Tuesday, Reuters reports . The revised outlook came when Netflix announced (PDF) it had raised $400 million by selling concurrent common and convertible debt.