![]() This generated more customer complaints and public ridicule, as shown in this scathing SNL parody (which in itself became a self fulfilling prophesy). Rather than addressing the pricing issue with customers or finding a way to appease their angry customers, Netflix made matters worse by splitting the DVD and Streaming businesses into two separate entities, requiring customers who wanted both services to maintain two accounts, one for the DVD service (the short-lived Qwikster) and the other for the streaming service. The company lost 1 million more customers than anticipated and Wall Street was not happy - sending the stock price down almost 50 percent, from $300 to $155. Privacy Policy.Netflix quickly realized it had botched the price increase. Under which this service is provided to you. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018Ĭable News Network. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. ![]() Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. "When you have a brand that consumers have a good relationship with - and Netflix was certainly one of those - consumers take a ton of flesh if you betray them." "Netflix is the latest poster child for what happens when you aggravate consumers," said Tobe Berkovitz, professor of advertising at Boston University. Netflix, a company that could do no wrong up until this summer, seems to have heard those customers loud and clear after its second blunder. "By separating them, Netflix would have allowed Apple ( AAPL, Fortune 500) and Blockbuster to compete with each portion of its business separately."įor consumers, the Qwikster spin-off would have been a royal pain: Customers would have needed to maintain two separate accounts on two different websites. "Netflix has a major leg up on its competition, because it offers library titles via streaming and any title with a two-day delay through the mail," said Brett Harriss, analyst at Gabelli & Co. It also would have eroded a competitive advantage. (Netflix doesn't break out those statistics in its earnings releases). Shares of Netflix ( NFLX) rose by as much as 10% following the news, before turning negative in the afternoon.įor investors, the problem with spinning off the DVD-by-mail service is that it accounts for between one-third and one-half of the company's overall sales, depending on which analyst you ask. "While this move doesn't solve the company's long-term issues, in the interim, at least it can try to accelerate some positive catalysts for customers and its stock price."Ġ:00 / 2:54 Netflix CEO: Losing Starz not a big deal "Basically, these guys are desperate, and this confirms it," said Tony Wible, analyst at Janney Capital Markets. The company had already lost an estimated 1 million customers, or about 4% of its subscribers, after Netflix split its DVD and streaming businesses in July, effectively raising prices on subscribers of both by 60%.Īnalysts said the company's second 180-degree turn indicates that even more customers were saying, "So long, farewell, auf Wiedersehen, adieu" to the business. "There is a difference between moving quickly - which Netflix has done very well for years - and moving too fast, which is what we did in this case." "Consumers value the simplicity Netflix has always offered and we respect that," Netflix co-founder and CEO Reed Hastings said. Netflix issued its second mea culpa in as many months, acknowledging the consumer outrage about its Qwikster announcement. members will continue to use one website, one account and one password for their movie and TV watching enjoyment under the Netflix brand," the company said in a statement. 18 that the company's movies-by-mail service would be rebranded as Qwikster and would add video games to its catalog, while the Netflix brand would be dedicated to streaming video.
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