Netflix Details Subscriber Loss, Expansion Plans For 2012 - HotHardware
Netflix Details Subscriber Loss, Expansion Plans For 2012

Netflix Details Subscriber Loss, Expansion Plans For 2012

Netflix posted its Q3 results today, and they reflect what analysts generally expected. The company's price hikes, combined with its schizophrenic announcement that it would split the brand (followed by a retraction a few weeks later) took a toll on the total number of subscribers. The total number of subscribers fell from 24.59M in Q2 to 23.79M in Q3. That's a net loss of 800,000 people, but the actual number of departures was likely much higher, given that the company undoubtedly added subscribers throughout the quarter.

The company's letter to shareholders shed light on how the events were internally perceived.
We think that $7.99 for unlimited streaming and $7.99 for unlimited DVD are both very aggressive low prices, relative to competition and to the value of the services, and they are the right place for Netflix to be in the long term. What we misjudged was how quickly to move there. We compounded the problem with our lack of explanation about the rising cost of the expansion of streaming content, and steady DVD costs, so that... many perceived us as greedy.

Our primary issue is that many of our long-term members felt shocked by the pricing changes and more of them have expressed that by cancelling Netflix than we expected. Because of this, our revenue and profits in Q4 will be lower than we had anticipated, but we'll remain profitable on a global basis.
Netflix expects to end 2012 in the red, but not because of a further loss in subscribers. The company will launch in the UK and Ireland in 2012, and while it believes that will drive new business in the long term, the short-term impact of opening new offices and creating international supply chains is expected to eat into profits.



One of the most interesting parts of Netflix's letter is the company's discussion of whether or not a 'hybrid' viewing option (streaming + DVD) is attractive. It notes that only 7 percent of new members are choosing both DVDs and streaming at $15.98. "One could argue that this percentage would increase if we reduced the price for hybrid, but if we were going to lower prices, we would do it on streaming. Our future is in rapidly expanding streaming, but we will make sure that current hybrid subscribers continue to get a great and stable experience. As of today, less than half of our streaming subscribers also subscribe to our DVD service, and we expect that number to continue to fall."

While interesting, Netflix's response is a better indicator of whether or not people are willing to pay for both services when the combined cost is $15.98, not an absolute indicator of whether or not people are interested in continuing to rent DVDs by mail. Knowing how many Netflix users used to rent DVDs by mail but have given up doing so would be a better marker of the long-term viability of such service.
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They might also see further decline due to other companies offering the same services now, such as Blockbuster/DISH or Amazon? Mind you their prices will need to come down and movie selection go up first, but that shouldn't be too far around the corner.

Btw Netflix in Canada is still terrible but SLOWLY it's getting better

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They're going to be licking their wounds for a while. They better come out with some new service plans soon or people will continue to leave. Video on demand services are getting better and are going to be offering options netflix can't compete with so they need to do some serious thinking to combat it.

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Well of course they're feeling the heat. Many of Netflix's customers detested what Netflix was trying to do, which was split the prices into two and separate the services. I personally don't see what the big problem is with the price separation itself seeing as how both businesses are becoming increasingly separate but I think the big problem was how they handled the situation.

Instead of users getting the gist of the price change; they instead became furious that Netflix would do this to them and they became even more furious when Netflix decided to split their DVD business off. (with was canceled almost instantly.) Even though they're doing all they can to save face, alot of people are still leaving Netflix in drones, and even Blockbuster got in of some of the Netflix hate by advertising their better prices; I'm sure that was short lived though.

Bottom line, even though I have never used Netflix and I think that the price split was a good thing of them to do. Netflix is going to have to do something to keep it's stock tumbling and it's subscribers leaving. I mean Netflix right now has the best movie selection and the best community but with this screwup and the competitors taking advantage of this screwup; Netflix is pretty much in hot water here.

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