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Technology Stocks : Netflix (NFLX) and the Streaming Wars -- Ignore unavailable to you. Want to Upgrade?

To: Sr K who wrote (633)	10/24/2011 4:54:56 PM
From: zax	Read Replies (1) \| Respond to of 2280

Netflix loses 800,000 subscribers By Julianne Pepitone @ CNNMoneyTech October 24, 2011: 4:30 PM ET money.cnn.com NEW YORK (CNNMoney) -- For Netflix, the hits keep on coming -- the bad kind, that is. The latest thwack: Netflix lost 800,000 U.S. subscribers in the quarter that just ended, which was littered with PR nightmares including a price hike and the Qwikster debacle. It was the first time in years that Netflix's U.S. customer base has shrunk instead of growing. "The last few months...have been difficult for shareholders, employees, and most unfortunately, many members of Netflix," the company said in its third-quarter earnings letter. "We've hurt our hard-earned reputation, and stalled our domestic growth. But our long-term streaming opportunity is as compelling as ever and we are moving forward as quickly as we can to repair our reputation and return to growth." But Netflix doesn't think the hemorrhaging is at an end. The company had 23.8 million U.S. subscribers as of Sept. 30, down from 24.6 million three months earlier. Around 21.5 million customers had streaming-only subscriptions, and just under 14 million had DVD-only subscriptions, with most customers mixing the two. By the end of the ongoing quarter, which wraps up Dec. 31, Netflix expects those numbers to drop further. It forecast that it will have 20 million to 21.5 million streaming customers and up to 11.3 million DVD-only subscribers in the U.S. Netflix shares fell 15% in after-hours trade, though the company reported earnings that beat analysts' expectations. Netflix earned $1.16 a share on a record $822 million in revenue. A nightmarish third quarter: Netflix's ( NFLX) quarter started off badly in July, when the company angered many subscribers by saying it would begin charging separate prices for its DVDs-by-mail and streaming video plans. That amounted to a big price hike for Netflix customers, as the cheapest-possible bill for customers who want both services jumped from $10 to $16 a month. Enraged customers flooded Netflix's site with tens of thousands of comments, as well as a barrage of tweets under the hashtag #DearNetflix. As a result, on September 15 Netflix was forced to cut its third-quarter subscriber estimates by 1 million customers, or about 4%, to 24 million. Shares plunged 19% that day. But the real debacle came just three days later, on September 18. Netflix CEO Reed Hastings announced company's movies-by-mail service would be rebranded as Qwikster, while the Netflix brand would be dedicated to streaming video. Still smarting from the price hike, customers were incensed. They raged against the idea of managing two separate accounts -- so much so that Netflix pulled a stunning reversal a few short weeks later and canceled the Qwikster plan. "Consumers value the simplicity Netflix has always offered and we respect that," Hastings said on October 10. "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." Many pundits and customers were shocked by the flip-flop, which led some to wonder about the company's long-term vision. And so Netflix has begun its fourth quarter under a dark cloud. Streaming catalog: Meanwhile, Netflix is struggling to build and maintain a robust streaming catalog. In September, pay-cable network Starz ended contract renewal negotiations with Netflix and announced it will will pull its movies and TV shows from Netflix early next year, yanking away one of Netflix's key sources of relatively recent movies. Studios are demanding more money for their valuable content, and now they have a bargaining chip in the form of Netflix's competitors. Beyond direct rivals like Hulu and kiosk service Redbox (owned by Coinstar ( CSTR)), big tech players like Amazon ( AMZN, Fortune 500) and Google ( GOOG, Fortune 500) are jumping into the streaming game. One analyst predicts that Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012.