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More Bad News for Netflix

Sep 15, 2011  •  Post A Comment

Netflix — one of the biggest success stories in the enterainment business until recently — seems to have found a way to snatch defeat from the jaws of victory.

Ever since its controversial price increase, things have been going downhill for the DVD rental and online streaming company. In the latest setback, the L.A. Times’ Company Town blog reports that the company’s share prices dropped a hefty 17% today after it announced bigger-than-expected subscriber losses.

The story reports: “Netflix says it now expects to have 24 million subscribers in the U.S. on Sept. 30, down from 24.6 million subscribers the company had at the end of June. Netflix previously estimated it would have about 25 million subscribers at the end of September.”

The reason for subscriber flight appears to be pretty simple: It’s all about the price increase. The company recently started charging separately for DVD rentals and online streaming, which translated to about a 60% price hike for customers using both formats.

Barton Crockett, an analyst with Lazard Capital Markets, called the pricing move "a rare, large and surprising misstep," and added: "This highlights the difficulty Netflix has internally of forecasting consumer response to the major price change," the Times piece reports.

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