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Netflix to shed 1 million subscribers this fall

Posted at 16 September 2011 02:00 CEST by etdragon

It seems that subscribers are not the only people unhappy with Netflix right now. Netflix announced Thursday that it will have to drastically lower subscriber projections for the third quarter. Wall Street responded quickly and negatively to the announcement demonstrating that investors might be questioning the growth of the company moving forward.

Netflix announced it expects to report 1 million less subscribers in the third quarter than it originally anticipated. That drop amounts to about 4% less subscribers than expected. Most interesting is the fact that the lowered projection includes about 800,000 less DVD only subscribers than the company expected.

It appears everyone who cancelled their subscriptions as a reaction to the significant price hike is being heard. Wall Street also got the message and Netflix found their stock closing trading at $169.25 a share, down $39.26.  That is a startling 18.9% drop. The only good news to come out of all of this is that the number of subscribers who pay for both DVD and streaming remains unchanged at 12 million.

The price hike is likely the primary cause for the lowered subscriber projections. When the increase was first announced Netflix seems very confident that the increase would not change the demand for their service. It appears they have miscalculated by about 1 million subscriptions.

The other issue involved here is the fact that the Starz deal Netflix had in place has essentially fallen through. Starz wanted to strike a new deal to the expensive tune of $300 million instead of the $30 million that was agreed upon in 2008. Netflix doesn’t want to pay a 10 fold increase so they let Starz walk away, taking a good chunk of the streaming content on the service with them.

This news puts competitors in a position to pick up some of the subscribers Netflix is shedding. Blockbuster has already called out Netflix in promotions and offered better prices to angry subscribers after the announcement of the price bump. If Blockbuster can put together a compelling service that offers good prices and plans they will be in a position to not only grab subscribers away from Netflix but potentially content providers as well. The smart thing to do here is take advantage of the pricing model that had previously worked so well for Netflix, offering the streaming as a cheap add on to a DVD rental service.

I personally canceled my streaming plan because of the combination of the price and the lack of quality content on that side of the service. If Blockbuster or someone else can offer something compelling I would definitely be willing to check it out. Did you dump Netflix after the price hike? Would you be willing to give a competitor a try if the price was right? Let us know in the comments.

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There are 6 comments

CDan
MyCE Resident
Posted on: 16 Sep 11 04:46
    The real issue is that Netflix handled the change in subscription plans and price changes VERY badly. I also dropped streaming and wound up saving money.
    justcallmebob
    MyCE Resident
    Posted on: 16 Sep 11 17:10
      I'm about ready to drop them altogether as well . . . I bought a roku and can pretty much watch anything Netflix has available.

      Hulu+ is pretty sweet.
      BradWright
      MyCE Member
      Posted on: 16 Sep 11 18:02
        My next Netflix billing date is the end of September, and I'll be cancelling my subscription the day before. I never used streaming video, and for the Netflix by mail subscription price, I can get more movies per month from Redbox, and get more recent movies while I'm at it.
        SithTracy
        MyCE Senior Member
        Posted on: 16 Sep 11 20:05
          I dropped streaming and do the one disc out at a time. The streaming choices were ehhh, and when I did use it, it was to choppy with my restrictive ISP. I may go with just RedBox in the future as well.
          samlar
          MyCE Resident
          Posted on: 19 Sep 11 10:11
            They just sent me an email from Reed Hastings, Co-Founder and CEO, Netflix that made was just plain stupid. All it did was say they are going to break the streaming and dvd by mail into two different names. Dvds by mail will be Qwikster now. It did nothing to make me feel good about netflex after the price increase.
            coolcolors
            MyCE Resident
            Posted on: 20 Sep 11 05:51
              Quote:
              Originally Posted by BradWright
              My next Netflix billing date is the end of September, and I'll be cancelling my subscription the day before. I never used streaming video, and for the Netflix by mail subscription price, I can get more movies per month from Redbox, and get more recent movies while I'm at it.
              Quote:
              HOW DOES IT WORK WHEN I RENT AN ITEM FROM REDBOX?
              1. Each item you rent from Redbox has a minimum rental period of one day. That one day minimum rental period is measured from the time you first receive your rental through 9:00 p.m. the next day – unless we tell you differently at the kiosk or otherwise before you rent. Please remember to account for differing time zones if you rent and return your rental at Redbox kiosks in different time zones. Each item you can rent has a daily rental charge. To incur a single daily rental charge, you must return your rental by 9:00 p.m. the next day in the time zone where you return your rental. For example, if the daily rental charge for a DVD is $1, you will be charged only $1, plus tax, if you rent a DVD at any time on Tuesday before midnight and return it the next day (Wednesday) by 9:00 p.m. local time at the kiosk where you return your item.
              2. Then, for each additional day you do not return an item by 9:00 p.m. local time, your rental continues and you will be charged an additional daily rental charge, plus tax, for each item. Many Redbox kiosks have DVDs available for rent for $1 per day, plus tax, so if you keep that DVD for the one-day minimum rental period and return it two days later by 9:00 p.m. local time, you will be charged $3 plus applicable taxes. For example, if you rent a DVD on Tuesday but do not return it until the immediately following Friday at 6:00 p.m., you would be charged the daily rental charge for the first day, plus two additional daily rental charges, plus tax. If the daily rental charge is $1, you would pay a total of $3, plus tax. If you returned the DVD after 9 p.m. on Friday but on or before 9:00 p.m. on Saturday, you would incur another daily rental charge, for a total of $4, plus tax. And so on.
              3. Each item you rent from Redbox also has a maximum rental period as disclosed at the kiosk screen before you pay.
              4. If you keep an item through the maximum rental period, that item is yours to keep and Redbox will charge you the maximum charge for that item less any amounts you have already paid for that item (typically, the daily rental charge for the first day (the minimum rental period) that was authorized at the time you initiated the rental). The maximum charge is equal to the daily rental charge multiplied by the number of days in the maximum rental period, plus tax.
              5. Redbox kiosk screens will display the daily rental charges and maximum rental periods for your rentals. Below is an example of daily rental charges (excluding tax), maximum rental periods, and the resulting maximum charges that may apply at your kiosk. Charges and rental periods may vary by kiosk. Also, charges may change from time to time, so please carefully review the pricing and rental information displayed on screen each time you rent from us. Additionally, you can call us at 1.866.REDBOX3 (1.866.733.2693) with any questions.
              <table border="1" cellpadding="0" cellspacing="0"> <tbody> <tr> <td valign="top" width="120">Item:
              </td> <td valign="top" width="132">Example Daily Rental Charge:
              </td> <td valign="top" width="184">Example Maximum Rental Period:
              </td> <td valign="top" width="140">Example Maximum Charge:
              </td> </tr> <tr> <td valign="top" width="120">DVD
              </td> <td valign="top" width="132">$1.00
              </td> <td valign="top" width="184">
              25 days
              </td> <td valign="top" width="140">$25.00
              </td> </tr> <tr> <td valign="top" width="120">Blu-ray Disc
              </td> <td valign="top" width="132">$1.50
              </td> <td valign="top" width="184">
              23 days
              </td> <td valign="top" width="140">$34.50
              </td> </tr> <tr> <td valign="top" width="120">Game
              </td> <td valign="top" width="132">$2.00
              </td> <td valign="top" width="184">
              30 days
              </td> <td valign="top" width="140">$60.00
              </td> </tr> </tbody> </table>
              I don't know your math but actually you loose if you go Redbox remember if you miss the even one day your charged 1.00+tax. With Netflix DVD you can wait and hold that single dvd as long as you want or return the next day or so and have no more charge other then what your subscribed to. So let's not give other misleading information by not telling all the readers what else is in the FINE print....ok...and if you keep Redbox dvd out more then month your CC charged full DVD price + tax....so they have restriction and if your not ready to tell all those interested in Redbox you should do a little research into their rental policies.

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