Netflix Loses 800K Customers, NFLX Stock Plummets
Netflix Stock Dives as 800,000 Subscribers Jump Ship
Netflix stock (nflx) used to be worth $300 per share at its peak. Now it's worth $78. Netflix stock dropped 35% overnight as news emerged of 800,000 subscribers disconnecting from the streaming and DVD-delivery service due to recent fee hikes.
Netflix was set to split its service into to distinct entities (Netflix and Quikster), a move which flew in the face of common sense but may have made sense on a spreadsheet somewhere. Common sense prevailed, but the price hike remained, and the damage was done.
Netlfix is facing its first subscription decline in years, and it's a big one. The still- (but slightly-less-) popular movie rental service fell victim to a classic mistake: never presume that your customers have nowhere else to go.
Netflix CEO Reed Hastings, in associating the user revolt with Occupy Wall Street and the Tea Party, is perhaps reading too much into it: maybe the issue is as straightforward as this: subscribers simply didn't want to pay more for a service that was not improving.
The warning here is clear: when you're selling customers something that they like, keep selling it to them until they stop wanting it. Turns out that people like those little red DVD envelopes. Who knew? (Hint: over 23 million people)
Netflix remains profitable, and its stock will likely recover from the sudden plunge somewhat soon, but the company can expect to operate at a loss as it expands into the UK and Ireland in 2012. The road ahead for Netflix is rocky, and it can't afford to hemorrhage customers.