» How hard will moving forward be? During yesterday’s earning report, Netflix’s CEO, Reed Hastings explained off his company’s tough year like this: “We made a couple of big mistakes this year. It’s up to us to own up to those mistakes and to move forward.” But will owning up to those mistakes be enough to stop the bleeding amongst investors? A 75 percent drop in three months — when your stock is worth more than $300 — is just insane. It dropped 36 percent today alone. If you think Netflix is going to bounce back, though, now’s the time to buy their stock.
» Oh, and it gets worse: The once-high-flying company now has 99 problems, and a shrinking stock price is one — one that dipped 26 percent in after-hours trading today. The company — which recently raised the cost of its legacy DVD plan, tried to split off DVDs into a separate site and then backed off after everyone hated it — also informed investors today that it would have a couple of unprofitable quarters as it expanded into the UK and Ireland. ”We expect the costs of our entry into the UK and Ireland will push us to be unprofitable on a global basis; that is, domestic profits will not be large enough to both cover international investments and pay for global G&A and technology and development,” the company said. CEO Reed Hastings blamed the drop in subscribers on the price increase.
Many Netflix users got a rude awakening today when they got an e-mail noting that prices were going way up on their combined DVD and streaming plans. It led to huge amounts of rage on the Interwebs after the report leaked. While we think this particular bout of rage is a little much, the real problem here is that Netflix has misjudged its customer base. The thing is, lots of customers would probably love to stream all their movies instead of waiting for DVDs in the mail, but the company’s seemingly jumping the gun. This is a change you make when your streaming service is at near-parity with your DVD service — which isn’t the case at all. The problem we see here is one of a thousand small cuts — changing the API so that third-party apps don’t work, redesigning the first-party apps to discourage DVD queues — that have created the overall effect that feels like a betrayal to many. For movie aficionados, the long-tail value is still there. But for more occasional movie fans who don’t veer too far off the beaten path of Hollywood fare, Redbox may have just gained a huge leg up. (photo by Flickr user Jamiesrabbits) source
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