has had a lot of troubles since it began making big changes to its service. It
first increased the prices of its plans back in July, which outraged customers to the point of jamming Netflix's customer
service phone lines.
To make matters worse, Starz decided not to
renew its contract with the company because Netflix wouldn't make subscribers
pay a premium price for Starz content. This means Netflix will lose Disney and
Sony-related programming come February.
Now, Netflix is cutting its third-quarter forecast by 1 million U.S.
subscribers, and has realized the full extent of customer wrath since raising
plan prices by 60 percent as well as splitting DVD plans from streaming plans.
"We know our decision to split our services has upset many of our
subscribers, which we don't take lightly, but we believe the split will help us
make our services better for subscribers and shareholders for years to
come," said Netflix.
The company is now predicting 24 million U.S. subscribers by the end of the
third quarter, which has been reduced from a previous forecast of 25 million.
Originally, Netflix predicted that 3 million subscribers would move to the
DVD-only plan while 22 million would transfer to the streaming-only plan. Now,
these predictions have fallen to 2.2 million DVD-only subscribers and 21.8
million streaming-only subscribers.
"Clearly, if the third quarter is slipping, there's risk to the fourth
quarter, as the year-ago period was a time when everything went right for
Netflix," said Barton Crockett, a Lazard Capital analyst.
Despite the cuts in U.S. subscriber predictions, Netflix has maintained its
third-quarter financial forecast and international subscriber outlook.
Netflix has said that it needed to raise prices in order to afford the hundreds of millions of dollars
to purchase licensing rights from movie studios and television networks. These
licenses help Netflix build its digital library.
quote: it was about setting Starz up as a premium add-on, like HBO or Showtime on cable.