Netflix: Last Few Months Have Been "Difficult"

Paul Lilly

Reed Hastings isn't infallible, we know this by now. As CEO of Netflix, he's been brilliant in growing his company into a premier streaming service, and spectacularly flawed in underestimating the fallout from customers over hefty price increases and major business model changes. But on that latter part, Mr. Hastings is anything but oblivious, at least after the fact, and has repeatedly owned up to the bad vibes directed at Netflix.

In a letter to shareholders announcing third quarter financial results, Mr. Hastings admitted that "the last few months have been difficult for shareholders, employees, and most unfortunately, many members of Netflix." That's all self-inflicted, sure, but he's aware of the damage and why it happened.

"While we dramatically improved our $7.99 unlimited streaming service by embracing new platforms, simplifying our user interface, and more than doubling domestic spending on streaming content over 2010, we greatly upset many domestic Netflix members with our significant DVD-related pricing changes, and to a lesser degree, with the proposed-and-now-cancelled rebranding of our DVD service," Hastings said. "In doing so, we've hurt our hard-earned reputation, and stalled our domestic growth."

That's not the kind of thing you want to hear if you're a shareholder, and at the same time, it's exactly what you want to hear. The CEO isn't oblivious to the consumer backlash, nor is he trying to hide it or sugarcoat it for investors. But will he do anything about it? That remains to be seen.

Mr. Hastings goes on to talk in some length about the mistakes Netflix made, but as far as hard numbers go, the company ended the quarter with 21.4 million streaming subscriptions and 13.9 million DVD subscriptions. Unique domestic subscribers declined to 23.8 million subscribers in part because of the "PR storm that engulfed" the Netflix brand, but the company still experienced year-over-year growth in gross additions with 4.7 million new subscribers, a 20 percent increase over one year prior.

You can read the full letter here (PDF) .

Image Credit: Flickr HackingNetflix

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