Netflix Faux Pas

[bigmack]

Talk about an immediate response from your customers!

Haven't they heard of focus groups?

http://i165.photobucket.com/albums/u70/macktime/NetflixLost800000MembersWithPriceRiseandQwiksterPl an-NYTimescom.png
http://www.nytimes.com/2011/10/25/technology/netflix-lost-800000-members-with-price-rise-and-split-plan.html

[redshift1]

A major cautionary tale on how not to succeed in business. Reed Hastings will become eponymous for poor judgement. Don't pull a Hastings.

[PaceAdvantage]

And those short the stock are thanking him for his daft maneuvering (I wasn't short NetFlix, but someone I know was short 1,000 shares going into that earnings announcement).

[Tom]

Chill out, Mac, and enjoy a nice refreshing NEW coke.

[raybo]

Many people have changed their plan to 1 DVD at a time, me included, as it is the cheapest, then they view movies instantly, instead of playing DVDs. This caused Netflix to regroup, charging more to make up for the loss of revenue on the DVD portion.

He did handle it very poorly.

[DJofSD]

The financial programs and talking heads were all over this yesterday. The consensus is the momentum for this stock is gone, never to return. If you got in recently, you're screwed. Guidance is terrible and it will be a long time before they're going to recover. The plan for international expansion is either on hold or slowed way down.

[JustRalph]

Chill out, Mac, and enjoy a nice refreshing NEW coke.

exactly what I was thinking........the New Coke was easier to fix though

Btw, count me as one of the 800k. I canceled the day they changed it up.

[Tom]

I only get CDs so I don't care what they do.

[ArlJim78]

when I saw the little video announcing this great new idea to split it up into two services, I couldn't believe what I was hearing, and I was ready to pull the plug as soon as they were going to try to direct me to something called quickster or whatever they were going to call the dvd service. and this coming on the heels of the big hike in the rates? unreal.

I don't think its as bad as New coke, but its up there for sure as one of the all time giant blunders.

as was mentioned below, how did this get past a focus group or test marketing or a beta study?

i'm hanging in with them with the one dvd+streaming service, but they better leave things alone or else I'm out.

[chickenhead]

first rule of a low priced subscription service: most people will continue paying you out of laziness. DO NOT give them reason to reconsider whether they really need it. Just collect the checks and keep yer mouth shut.

[GameTheory]

Many people have changed their plan to 1 DVD at a time, me included, as it is the cheapest, then they view movies instantly, instead of playing DVDs. This caused Netflix to regroup, charging more to make up for the loss of revenue on the DVD portion.No they didn't have to "regroup" -- it was all part of the plan from the beginning. They had deliberately under-priced the service to dominate the market. They WANT people to drop the DVD service (or pay more) and go to streaming only. They adjusted the price to something more realistic given the actual costs now that they've crushed the other rivals (for DVDs). Now they are looking to dominate the streaming market as well.

This whole thing hasn't been as much of a disaster as it seems -- mainly a PR gaffe and the Qwikster split was ill-advised. They were expecting to lose subscribers and they did. Others shifted plans, also as expected -- that's what they wanted them to do -- either switch to streaming only or to pay for the higher cost of DVD delivery. But they still posted nice profits, and they'll be fine.

[bigmack]

first rule of a low priced subscription service: most people will continue paying you out of laziness. DO NOT give them reason to reconsider whether they really need it. Just collect the checks and keep yer mouth shut.
That's exactly where I was. I was one of the 800,000. Whatever I was paying was negligible enough to not even think about it. Then, when called to attention, I figured I wasn't using it enough to justify a continuance of service.

I looked into a business of renting CD's of yesteryear. Ya know there's a law on the books making the renting of CD's illegal. :confused:

[Valuist]

I bought two puts last April (Jan 2012 expiration). Part of me wants to cash in now but w/a chart as broken as this one, have to think there's more downside. Hard to imagine a V-bottom from today.

So what will be the next cult-type stock to crash? My guess would be Lululemon. Wouldn't short it quite yet but it looks like a replay of Krispy Kreme, Crox and Netflix.

[pandy]

I dropped Netflix and switched back to Blockbuster through Dish Network. Unfortunately they closed most of the Blockbuster stores so I don't have the luxury of returning to the store, which is great because you get unlimited rentals. However, the $10 a month charge to my Dish bill is a good deal, one dvd out at a time, unlimited rentals through mail or store, and now they have Blockbuster Movie Pass streaming with tv shows and movies.

The streaming interface stinks right now but they just started. Apple is going into TV so who knows what's going to happen. I think that part of the huge drop in stock price for Netflix is the fact that investors know there is new competition from Dish/Blockbuster streaming and potentially Apple, plus Amazon is making a big push.

[Tom]

The problem with streaming, around here anyway, is that they are capping internet service so that one movie might just use up your whole month.

Unlimited is very expensive and will only get worse.
As Google, Apple, etc increase the availability of downloading media, there are predatory providers just waiting to screw you.

[GameTheory]

The problem with streaming, around here anyway, is that they are capping internet service so that one movie might just use up your whole month.

Unlimited is very expensive and will only get worse.
As Google, Apple, etc increase the availability of downloading media, there are predatory providers just waiting to screw you.
Most broadband caps are around 250GB, but I think some are going down to around 150GB. One HD movie is 3-4GB, so you still have to watch quite a bit to hit the cap...

[JustRalph]

Post 10-11-12 are dead on. Except I don't think they wanted the subscribers to mailed DVDs to go away so fast and all at once. Whether you were getting DVDs in the mail or just streaming, 800k at about ten bucks a month is serious hit

Major screw up.

[chickenhead]

No they didn't have to "regroup" -- it was all part of the plan from the beginning. They had deliberately under-priced the service to dominate the market. They WANT people to drop the DVD service (or pay more) and go to streaming only. They adjusted the price to something more realistic given the actual costs now that they've crushed the other rivals (for DVDs). Now they are looking to dominate the streaming market as well.

This whole thing hasn't been as much of a disaster as it seems -- mainly a PR gaffe and the Qwikster split was ill-advised. They were expecting to lose subscribers and they did. Others shifted plans, also as expected -- that's what they wanted them to do -- either switch to streaming only or to pay for the higher cost of DVD delivery. But they still posted nice profits, and they'll be fine.

The problem I have with their unlimited streaming is it seems like their costs are going to scale pretty linearly. I'm not sure how they see that fitting under a single price unlimited package -- as content costs rise, on top of adding content and keeping the rights for existing content, the price to Netflix goes up in step. Ultimately if we want a la carte offerings we're going to end up paying for things a la carte as well, or paying cable package like prices for the full monty.

They'll have tiered (or a la carte) streaming soon enough -- they should have introduced it now. Their other mistake is that it is the synergy between streaming and DVD rentals that makes their service a killer, and they made keeping some grip on both halves expensive.

They should have offered a la carte streaming rentals for 1st run material to reasonably bridge the DVD chasm. At least that would have been a start.

"Well, I give up my DVD plan, but at least I can still rent them cheaply, and we only watched 2 DVDs a month so that'll be cheaper anyway." It's a very natural segway to fill that content void. I'm perfectly happy going all streaming -- but at least give me a method to watch whatever I want via streaming. For a customer that had both, and now as a customer that only has streaming -- Netflix just became less valuable to me.

This idea that they can maintain a one price unlimited streaming, that they can or will fit all the content they need under it, etc -- it just doesn't work all that well. It's kind of (or one of the things) what everyone hates about cable.

[raybo]

No they didn't have to "regroup" -- it was all part of the plan from the beginning. They had deliberately under-priced the service to dominate the market. They WANT people to drop the DVD service (or pay more) and go to streaming only. They adjusted the price to something more realistic given the actual costs now that they've crushed the other rivals (for DVDs). Now they are looking to dominate the streaming market as well.

This whole thing hasn't been as much of a disaster as it seems -- mainly a PR gaffe and the Qwikster split was ill-advised. They were expecting to lose subscribers and they did. Others shifted plans, also as expected -- that's what they wanted them to do -- either switch to streaming only or to pay for the higher cost of DVD delivery. But they still posted nice profits, and they'll be fine.

Do you know this as fact or is it just your opinion?

What you said is not how it was explained to me via email.

[bigmack]

http://i165.photobucket.com/albums/u70/macktime/NetflixMarketValueShrivels-NYTimescom.png

[raybo]

Post 10-11-12 are dead on. Except I don't think they wanted the subscribers to mailed DVDs to go away so fast and all at once. Whether you were getting DVDs in the mail or just streaming, 800k at about ten bucks a month is serious hit

Major screw up.

I don't think they wanted the DVD people to go away at all. I think that they had to do something to more accurately reflect the costs, to them, of providing both services.

As I said earlier, it was not handled well.

Whoever the "vision guy" is, over there, needs to go back to school or something.

[bigmack]

In that article some genius posted it states 800M represents 3% of their subscriptions. So they have 24 million households throughout the US and Nanookville.

I was one of the first customers of theirs. I must have turned-on more than 200 others to join at that time. Then they started slow-sending. Which they were class action sued over. Then you couldn't stand a snowballs chance in Hell of promptly getting a new release. I haven't tried to get a new release in ages because they all SUCK. Anyone testify to nw availability?

Competition for streaming is about to get might fierce. Arguably, their Watch Now selection lacks depth in the feature film Dept.

[forced89]

IMO Netflix should have decided what they want to be long term, streaming or mailing. Once they made that decision they should have spun off the other business to their stockholders as a separate company. By keeping both streaming and mailing under the same corporate umbrella there will be a tendancy to let the profitable subsidize the less profitable (or even unprofitable) to their long term detriment.

[GameTheory]

The main thing I like about their streaming service is that it is not a la carte -- I'm constantly sampling things. If I have to pick out something and pay for it before I watch, forget it.

[chickenhead]

The main thing I like about their streaming service is that it is not a la carte -- I'm constantly sampling things. If I have to pick out something and pay for it before I watch, forget it.

If you wanted to watch a new release today online you'd go rent it on amazon or itunes or YouTube or from your cable company. It hardly helps netflix to not offer the same thing, it hurts them that their very own subscribers must get "net flix" from competitors. Especially when for many people that is the high value portion. Better to be a one stop shop, to dominate that customer. It be kind of like if Google referred you to yahoo for the most popular searches back in the day, and ONLY did obscure long tail stuff. Interesting, sure, but not a complete service, not something you can rely on. And just like that scenario, you have to go and search to find out. It's pretty crappy for a whole lot of people.

the only way for them to be one stop shop online is to offer a la carte for expensive stuff, or increase their monthly streaming price by 10x. I think a la carte is probably the better option.

[redshift1]

One thing Netflix is good for is Blu-ray rental. Currently (as far as I know) nobody offers the quality of Blu-ray and that includes Cable , Dish, and Direct TV.

[chickenhead]

If I wasn't clear -- I dont think everything should be a la carte -- I'm fine with the streaming subscription.

I'm saying that wherever at all possible, 100% of everything they don't have in their subscription catalog should be offered a la carte. They simply can't afford to offer it as part of the subscription, but it costs them nothing to offer it a la carte.

It would make it possible to *know* that when you open up Netflix, you can watch whatever the hell you want -- which is a valuable thing.