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Netflix CEO Reed Hastings  (Source: Netflix)
Netflix pays the price for its Q3 mishaps

Earlier today, we reported that Netflix would be extending its services to the UK and Ireland. This afternoon, however, Netflix's earnings report shed some light on all the turmoil that has surround the company in the past few months.
 
Netflix announced that it lost 810,000 customers during Q3, compared to net subscriber additions of 3.3 million and 1.8 million for Q1 2011 and Q2 2011 respectively. This should come as no surprise considering that the company has made a few shaky moves like raising prices on customers and announcing its Qwikster DVD spinoff only to backpedal shortly after.

Netflix also announced that it is reducing guidance revenue and profit for Q4 due to the loss in subscribers. The company contends, however, that it will still remain profitable.

In a letter to shareholders, Netflix expressed its disappointment in how things have panned out this past quarter:

While we dramatically improved our $7.99 unlimited streaming service by embracing new platforms, simplifying our user-interface, and more than doubling domestic spending on streaming content over 2010, we greatly upset many domestic Netflix members with our significant DVD-related pricing changes, and to a lesser degree, with the proposed-and-now-cancelled rebranding of our DVD service. In doing so, 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.
 
Despite the bad news above, Netflix reported Q3 revenue of $822 million and earnings per share of $1.16. Those were well above analyst estimates of $811 million and $0.94/share respectively.
 
However, those numbers weren't enough to stop shares of Netflix from sliding nearly 27 percent in after hours trading.

Source: Netflix Letter to Shareholders



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Bored
By p05esto on 10/24/2011 6:17:56 PM , Rating: 2
I just got bored with the streaming selection Netflix offered. There was hardley ever a new movie in there that I hadn't already seen or wasn't 10 years old. The streaming selection isn't even close to what was available by DVD. You can't blame Netflix for the stupid licensing costs and greed of the movie studios, but still.

I left Netflix because of the dramatic price increase with NO improvement in movie selection. Then they limited how many movies you could stream into your house at once and that was the nail in the coffin for me. I left before the Quickster thing, but that would have also pushed me off the edge. I'm now with Blockbuster DVDs by mail and am generally happy, there are pros/cons to both, but on principal alone I'm sticking with Blockbuster unless they tick me off.




RE: Bored
By Hiawa23 on 10/24/2011 6:34:22 PM , Rating: 2
I am fine with my $14.99/month 2out at a time Bluray/DVd rentals. I canceled streaming, cause there was little there I watched, & everything in the stremin category If I want to watch that bad, I will just rent the physical copy.


RE: Bored
By gdtaylor on 10/24/2011 6:47:01 PM , Rating: 5
quote:
You can't blame Netflix for the stupid licensing costs and greed of the movie studios, but still.


The movie studios are simply encouraging you to use alternative download services such as The Pirate Bay. These alternative download services feature simultaneous worldwide release, a choice of video formats, no DRM, no unskippable trailers, ads or anti-piracy messages. Clearly the movie studios love piracy and try to encourage it by ensuring that the paid options are inferior in every way.


RE: Bored
By Samus on 10/25/2011 3:51:34 AM , Rating: 3
We just do streaming here. It's good for catching up on TV series like Mad Men, The Wire, Battlestar Galactica, etc.

But when we've caught up after this winter, we will probably discontinue the service completely, or switch to one DVD out at a time.

I just wish the streaming library was more comprehensive.


RE: Bored
By Ytsejamer1 on 10/25/2011 8:35:59 AM , Rating: 4
I'm still on the default 3-dvd and streaming plan although there was a big price increase this summer. I still find it's a good value compared to cable or satellite.

Yes the streaming isn't as up to date as I'd prefer, but as mentioned, there are plenty of titles out there that I find worth watching. My wife likes to keep up on the latest TV shows, so the $8 hulu plus subscription comes in handy. I'm paying $30 a month versus $80-$120. Works for me.

Their service is still good and for now, they'll continue to get my money each month.


RE: Bored
By Arsynic on 10/25/2011 11:29:06 AM , Rating: 3
Thank you. I hope their hanging onto an antiquated business model destroys them.


RE: Bored
By nubie on 10/25/2011 2:33:09 AM , Rating: 2
I think another big problem is that the selection on the set-top boxes is poor. I found dozens of movies I liked a lot, I had to search for them by name, after looking up a list of movies from genres/actors I liked on a computer. You can't browse at all from the stupid menu on the set-top boxes.

Even a big button labeled "re-load" to get some different choices. Save all the old choices (what would it cost, 1kb?), then you can get more to see.

Dumbing down an interface is sometimes just what it sounds like.


I guess it wasn't that bad
By retrospooty on 10/24/2011 6:35:38 PM , Rating: 2
there are still over 24 million customers. not quite the collapse some were predicting. I know I kept mine and will keep it as long as I find it useful.




RE: I guess it wasn't that bad
By mac2j on 10/25/2011 9:41:58 AM , Rating: 2
November / December will tell the real story.

Netflix doesn't actually make it very easy to CANCEL - what they get you to do is SUSPEND your subscription.

But after 3 months the SUSPENSIONS convert to CANCELLATIONS. Most of my friends (and me) suspended our subscriptions when they announced the price hikes so that we'd still have our ratings / preferences saved in case they reverted them.

Netflix has a ton of cancellations coming in the next 2 months as all the accounts that were suspended prior to the Sept. 9th price hike deadline cancel.


RE: I guess it wasn't that bad
By retrospooty on 10/25/2011 10:00:12 AM , Rating: 2
Good point. Well see next Q.


RE: I guess it wasn't that bad
By mead drinker on 10/25/2011 12:15:37 PM , Rating: 1
Not so bad? the market has already decided that for them. Netflix stock is trading at 77 bucks right now, a devaluation of 35% on the day. Couple that with the thought that it traded at 290 at its peak earlier this year and that they need capital in order to pursue the content that they want through dealings with major studios. They really shit the bed in this one.


RE: I guess it wasn't that bad
By retrospooty on 10/25/2011 3:04:20 PM , Rating: 2
This article is missing alot of data. What it doesn't show is that the stock price is way over-reacting, and most of that is due to a costly loss in the UK startup.

In reality, they made a good profit this quarter, and have expanded business into new regiuons. This 810,000 is only 3% of their customer base. They still have 24.5 million customers. They may lose more next quarter, but considering the cost doubled, for some plans they would have to lose alot more than 3% to be effected. The stock will stabilize.


RE: I guess it wasn't that bad
By idiot77 on 10/25/2011 6:29:14 PM , Rating: 2
Market will bounce back. This company is actually making money. This is one of those stupid blips due to moron investors and has little basis in reality, like most of the stock market.


RE: I guess it wasn't that bad
By kattanna on 10/25/2011 12:56:22 PM , Rating: 2
im also of the opinion, since i dont have detailed inside info, that a large majority of those canceled accounts are those at the lowest end of the spectrum and those that didnt make them much, if any, money.

people who have accounts like mine, 5 DVD's at a time, there really wasnt much of a price change.


RE: I guess it wasn't that bad
By MrRuckus on 10/25/2011 2:59:01 PM , Rating: 2
You are just subsidizing the other 800,000 that left is all + a little more. Netflix Im sure couldn't be happier. They are still making more money when you look at the bottom line from quarter to quarter. When that trend switches gears is when they should worry.


I'll come back when they offer 3D
By lecanard on 10/24/2011 8:50:03 PM , Rating: 2
As long as they don't offer 3D rentals, I will be using my Netflix money to buy them myself. There are many fewer customer who want 3D right now, but there are some, so why don't they buy a few 3D versions to rent out?




RE: I'll come back when they offer 3D
By retrospooty on 10/24/2011 9:04:18 PM , Rating: 2
3d is never going to happen... we have had it since the 1950's and they keep pushing it, but it just doesn't catch on. Even with the best tech today its still irritating to watch for too long. To watch a movie once in a while is ok, but people just don't like it regularly.

I find it irritating tthat tv manufactures spent years trying to push this crap again instead of concentrating on higher definition. now that its becoming clear that it's not catching on it set us back years for higher def tv


RE: I'll come back when they offer 3D
By mac2j on 10/25/2011 9:46:17 AM , Rating: 2
I agree and don't agree.

The old people that say "we've had 3D since the battle of [insert historical event] and it's just a passing fad" don't get it. Its better. People want it now. Maybe its just people under 35 - that's possible. We like it - we're not getting tired of it. It doesn't give us headaches. It's improving - the newest TVs can be watched with movie theater 3D glasses. Large screens which require no glasses but which you have sit perpendicular to are in testing etc. It isn't going away.

HOWEVER - its very frustrating that they pushing 3D as an alternative to increasing resolutions. I really thought I'd be able to buy 1440p, 1600p, 4K ... TVs by now.


By retrospooty on 10/25/2011 10:06:42 AM , Rating: 2
It would be nice to have both. A 3d capable TV that provides perfect 2160p or whatever the next standard specpoint is set at. As long as the 3d could be turned off and look perfect I would gladly buy it.


By FITCamaro on 10/25/2011 11:24:10 AM , Rating: 1
I'm fine with 1920x1200 for a while. Nor do I really care about 3D until they get rid of the glasses. It just doesn't add anything to the experience. Like with games, I care about quality of content, not pretty resolutions or graphics. And the quality of programming is in the shitter.

And I'm under 35.


RE: I'll come back when they offer 3D
By Noya on 10/25/2011 3:23:05 AM , Rating: 3
3D? Are you like 5?

3D would be cool for gaming (until a headache happens 40mins into it) or porn.


RE: I'll come back when they offer 3D
By tayb on 10/26/2011 12:08:44 AM , Rating: 2
Why would they? The market is so small it they couldn't possibly justify spending money on it. This is a company that prides itself on analysis and statistics. They aren't going to invest money in a fad.


Netflix has problems listening to customers.
By rdhood on 10/25/2011 4:51:32 PM , Rating: 2
I have Netflix. My observations:

1) Netflix does not listen to customers. Ever try to give them feedback? It's impossible. You can't send them an email. Any "feedback" is filling out a form of checkboxes of THEIR predetermined questions. If they would listen, this is what I would tell them:

2) STREAMING SUCKS. Yes, there are some Major metro areas in the U.S. with REAL High Speed streaming. But MOST of the U.S. is like me: they have "high speed internet" that will not support a HD stream. Streaming looks somewhere between VHS and CD. That's great if your kid wants to watch "Pengu" or "Shaun the sheep", or if you are accessing content that you cant get on DVD/BD, or content you don't care about. But it is no substitute for a physical BD.

So they basically tried to double my Netflix cost on the basis of their wonderfully crappy streaming product. I did not buy an HD TV to watch pixelated junk. They never asked their customers:

"If EVERYTHING available on BD were available streaming, would you forgo the BD and move to streaming-only"?

H&%LL NO!

If they had, they could have saved 800,000 customers and conserved their $300 stock price.




By FITCamaro on 10/26/2011 11:26:56 AM , Rating: 2
I live in Charleston. Hardly a huge metro area. And around here connections are more than quick enough to do HD streaming. Maybe not on a crappy DSL connection. But I think most average $45-50 cable connections should be good enough these days.

But are you really going to blame Netflix for the fact that you can't get fast enough internet to stream in HD? What do you expect them to do?


New movies?
By masamasa on 10/24/2011 7:35:20 PM , Rating: 3
If they offered new movies I'd switch over in a heartbeat, but not interested in watching old stuff over and over again. If the studios inflate prices with licensing they'll never combat piracy. It's only worth what people are willing to pay for it.




Netflix
By thisisaname on 10/24/2011 8:42:08 PM , Rating: 2
Burn, baby burn.




Not bad honestly
By tayb on 10/26/2011 12:06:18 AM , Rating: 2
Their profit was at $62 million on something like $800 million revenue or something.

I enjoy the streaming. People always complain about the select but I think that you don't really understand the usefulness. It's designed for a "I want to watch a movie or TV show but I don't know what to watch" kind of mood rather than a "I want to watch THIS specific movie." They have entire seasons of great TV shows and a huge library of classic movies. I rarely go on to the service to find a specific movie to watch rather I go on there to find SOMETHING to watch and I always find something.




Heads should roll
By RayW on 10/27/2011 3:33:21 AM , Rating: 2
1st raising prices w/o putting the blame on the studios. Then the whole Qwikster debacle. Who's in charge of PR at Netflix? If I were a shareholder I'd be pissed.




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