800,000 Customers Leave Netflix for Possibly Greener Pastures
posted Saturday Oct 29, 2011 by Nicholas DiMeo
Ever since Netflix's confusing and frustrating, yet understandable and needed price hike (and brand restructuring), the company hasn't been doing as well as they have in the past. Aside from the thousands of negative comments on their Facebook page, clambering for Netflix to go back to their old price structure, they realized that after all is said and done, you shouldn't just increase your prices by 60% without at least telling your millions of subscribers why. Because of that, their idea of Quikster and separating DVDs by mail from their Internet streaming service quickly fell through and Reed Hastings pretty much said that they were just kidding this whole time. What a bunch of goofballs over there at Netflix, right?
Still, customers didn't find Hastings' comedic timing to their liking and complained more about how dumb of an idea splitting up the companies was to begin with. What happened next lies after the break.
A few weeks ago Netflix altered its projections to indicate that it would expect to lose a substantial amount of customers because of all of the changes. This week, the subscribers spoke with their credit cards, in numbers - or, lack thereof. Stockholders fell to their knees and wiped their tears with their nifty Netflix DVD envelopes as Netflix reported that it finished the month of September with 23.8 million customers. For most businesses, that's a pretty high number, so one would think Netflix should be happy. However, that is not the case here, as those 23.8 million are after 800,000 customers left the company since June. Sadly, the worst may be yet to come as Netflix projects to lose even more moving into the holiday season.
For their stock, a $42.65 price tag per share is all that is left after an almost 36% drop in price on Tuesday, from $76.19. To put that in perspective, three months ago the company was trading at over $300 per share and hasn't been this low since April 2010, before Netflix hit the $2 billion river. Customers, investors and stockholders alike all agreed that the unexplained increases followed by what seemed to be a rushed and head-scratching brand split definitely wasn't the right move for Netflix at all.
Analysts agree with this as well, and have downgraded the rating from Buy to Neutral and have also cut target prices on the Netflix stock by over 50%. While Netflix may still be seeing numbers in the black that have surpassed their expectations financially, losing 800,000 customers is going to have a nasty effect on their bottom line, especially when we see how consumers will spend their cash on streaming devices this holiday season. If those angry ones who jumped ship get a device that can stream Hulu Plus or even Amazon Prime and are happy with it, they might have lost that customer for good.
I'm still sticking with the big red machine, are you? Still using Xbox LIVE to stream their massive content catalog, are you using DVDs by mail or did you keep both? Tell us in the comments.