DCG Posted September 16, 2011 Share Posted September 16, 2011 yeah, their price change is turning out to be a terrible decision. The price change will make sense in a few years, but until they build up their digital content library it's tough to justify paying extra for. Link to comment Share on other sites More sharing options...
Liberty Posted September 19, 2011 Share Posted September 19, 2011 Now they're splitting the DVD and streaming sides of the business: http://online.wsj.com/article/SB10001424053111904106704576579903892361530.html Link to comment Share on other sites More sharing options...
ericd1 Posted September 19, 2011 Share Posted September 19, 2011 I cancelled the mail option when they raised prices because we weren't using it. Now the teens are complaining they don't have anything worth streaming, so I'm probably going to pull the plug on that service too...I've noticed the remaining neighborhood video store's parking lot seems to be very full these days... CEO's apology and the comments on his blog are telling... http://blog.netflix.com/2011/09/explanation-and-some-reflections.html Link to comment Share on other sites More sharing options...
JSArbitrage Posted September 19, 2011 Share Posted September 19, 2011 I cancelled my entire account out of principle. There are too many cheap/free substitutes and it really irks me to get nickel and dimed by people/entities. Let's face it: the CEO thought he could shave a few more bucks from loyal customers and it blew up in his face. Good. Link to comment Share on other sites More sharing options...
DCG Posted September 19, 2011 Share Posted September 19, 2011 Reed didn't even really apologize for the right thing. He apologized for the way they announced the price change, which is not what people were upset about. People are upset that they tried to put through a large (by %) price increase without adding any value. The price change makes sense for the future, but was done too early (they need to build up their digital library first). Now they have to spend more $ to market the new brand (which sounds like a fictional dot-com, circa 2000). Giving that side the business it's own name makes sense if they're hoping to sell off that business at some point, but by the time they expand their digital library, the DVD business won't have a ton of value. And breaking up DVDs and streaming into 2 completely different websites makes for an awful user experience for people who subscribe to both services. All the ratings and reviews will probably be separate, recommendations will be based off different things, and you have to go to 2 sites to manage your queue. I think they had the view that their service was so good that they could put though big price increases and everyone would just pay them, where a lot of people cancelled. I'm ok with the price change, as I'm now only using the DVD service and paying Netflix less each month. A lot of people are doing the same thing, and Netflix is losing revenue because they they didn't predict so many people would do that, and assumed everyone would just pay for both services. Their streaming selection is awful compared to their DVD selection. When it gets to the point where they're equal, I'll cancel the DVD service and pay just for the streaming service. The first line of Reed's email should be, "I messed up, and I owe you an explanation of my plans to mess up even further." Link to comment Share on other sites More sharing options...
zarley Posted September 19, 2011 Share Posted September 19, 2011 I cancelled the mail option when they raised prices because we weren't using it. Now the teens are complaining they don't have anything worth streaming, so I'm probably going to pull the plug on that service too...I've noticed the remaining neighborhood video store's parking lot seems to be very full these days... This is exactly where I am at the moment. Their streaming selection is crap. Forcing subscription customers to give serious thought to your value proposition in the way that they did is a boneheaded move. If I weren't pushed into reconsidering, I'd probably have left it alone and kept paying them every month. But, made to think about what I'm getting for my money, I realize that I don't need or want the service. With all the streaming content options I have and Redbox and PPV; why do I need Netflix? Link to comment Share on other sites More sharing options...
given2invest Posted September 19, 2011 Share Posted September 19, 2011 Ditto what everyones sad. I cancelled in July on the news. Link to comment Share on other sites More sharing options...
Guest Hester Posted September 19, 2011 Share Posted September 19, 2011 Interesting thread. Costs (customer and content) are rising rapidly, customers are starting to leave, the business model is looking broken and is undergoing a makeover, the CEO is inexperienced and has handled the price increase horribly, analysts targets are still too optimistic, the content providers are realizing they deserve some of Netflix's profits... And yet even after the 50% fall this stock is selling at an extremely rich valuation and is pricing in aggressive growth. The transition from a shareholder base full of momentum/growth investors to a base full of value investors will be VERY painful for the stock. I'm short. Link to comment Share on other sites More sharing options...
Guest valueInv Posted September 19, 2011 Share Posted September 19, 2011 The stock's down more almost 50% from its peak. How did the shorts on this board make out? Link to comment Share on other sites More sharing options...
Eric50 Posted September 19, 2011 Author Share Posted September 19, 2011 I'm out with a small profit. Link to comment Share on other sites More sharing options...
abcd Posted September 19, 2011 Share Posted September 19, 2011 I understand the 'Value oriented approach' that people on this board have been born with is driving a lot of feelings about this recent price increase. But if you think about the price increase (for DVD), when they increased from 2 to 8, I too have cancelled the DVD part of my subscription. But later when I realized, for the last so many months I have consistently received and watched an average of 4 DVDs per month. Now when I compare that with my other options (RED Box ...) Netflix was 50% cheaper. In fact as an investor in Netflix I was upset the price of DVD is so cheap. I am not sure what Netflix pays to USPS per packet mailed, assuming it is 30 cents, Netflix is getting 80 cents per subscriber (who have the 1 DVD out plan) per month excluding the expenses for running those facilities that mail the DVDs. In fact, investors should be upset about how can any business survive with those kind of numbers, rather than customers getting upset they are not getting a DVD mailed to their home for 50 cents per DVD, no? Link to comment Share on other sites More sharing options...
rkbabang Posted September 19, 2011 Share Posted September 19, 2011 This has made us re-evaluate our Netflix subscription and the results were that we are staying with the 2-out DVD plan and streaming. No change for us. Compared to the 3-figure per month that we pay Comcast, Netflix is still a steal. I'd give up cable completely before giving up Netflix even if they were the same price. I don't watch much TV and when I do it is either a movie or TV series disk from Netflix. My wife and kids use the streaming constantly. My re-evaluation has led me to cut back on my cable channels, not my Netflix services. I cancelled HBO & Showtime, and went from "Digital Plus" to just the basic Digital cable package. Compare the value you get with Netflix vs what you get from your cable company. It isn't even close. I'm no longer a Netflix shareholder, so the recent price drop didn't effect me. I bought NFLX years ago at $11 then sold after it ran up to what I thought was a ridiculous $68. Of course it kept going and going and going after I sold. --Eric Link to comment Share on other sites More sharing options...
abcd Posted September 19, 2011 Share Posted September 19, 2011 This has made us re-evaluate our Netflix subscription and the results were that we are staying with the 2-out DVD plan and streaming. No change for us. Compared to the 3-figure per month that we pay Comcast, Netflix is still a steal. I'd give up cable completely before giving up Netflix even if they were the same price. I don't watch much TV and when I do it is either a movie or TV series disk from Netflix. My wife and kids use the streaming constantly. My re-evaluation has led me to cut back on my cable channels, not my Netflix services. I cancelled HBO & Showtime, and went from "Digital Plus" to just the basic Digital cable package. Compare the value you get with Netflix vs what you get from your cable company. It isn't even close. I'm no longer a Netflix shareholder, so the recent price drop didn't effect me. I bought NFLX years ago at $11 then sold after it ran up to what I thought was a ridiculous $68. Of course it kept going and going and going after I sold. --Eric Exactly. On top of it, I have never seen a more humble CEO, in recent times. He is actually trying to apologize. Has anyone paid close attention to the medical bills that you receive from your health care providers? If Reed Hastings is apologizing for this, what should the Health Care providers do for what they have done to their customers (all Canadians, you can quit giggling, now)? Link to comment Share on other sites More sharing options...
bargainman Posted September 19, 2011 Share Posted September 19, 2011 None of this is the point. Of course NFLX is still a good deal.. problem is that Reed has created the classic case of false scarcity. Anyone who has read Cialdini's book influence will recognize what he has done immediately. You don't give people something for free, and then take it away or charge for it.. Or if you do so you don't do it all at once in a massive big publicized move. Check out this page, about half way down: http://books.google.com/books?id=mTYj9XUlYvMC&lpg=PA246&ots=9Z9yAkbcmZ&dq=cialdini%20influence%20revolution&pg=PA257#v=onepage&q&f=false This sort of newly experienced scarcity is what caused revolutions. He should have known better. Link to comment Share on other sites More sharing options...
Liberty Posted September 19, 2011 Share Posted September 19, 2011 I'm totally puzzled by NFLX's recent moves, but it has always been way too pricey for me, so I never owned any (and I don't short) and so it has no impact on my wallet. Just spectator sport for me. I'm not convinced that it is possible to have a decent moat in the streaming business. with DVD, at least they had lots of expensive infrastructure and could be the low cost producer in the way that COSTCO or Amazon is.. With streaming, all that keeps people coming back are the brand, quality of service, and price. If they screw up any of those too badly, people can easily switch, and competitors can more easily set up to compete (especially those who own lots of content - that's the only real kind of moat in streaming). It makes sense to want to de-emphasise the DVD side of the business, but IMO they were a couple of years early and they did it badly (Qwickster? wtf?). Link to comment Share on other sites More sharing options...
DCG Posted September 19, 2011 Share Posted September 19, 2011 Exactly. On top of it, I have never seen a more humble CEO, in recent times. He is actually trying to apologize. Has anyone paid close attention to the medical bills that you receive from your health care providers? If Reed Hastings is apologizing for this, what should the Health Care providers do for what they have done to their customers (all Canadians, you can quit giggling, now)? He apologized, which is nice, but as I said earlier, he didn't really apologize for the right thing, and his email/blog post isn't very well articulated IMO. And again, splitting it into 2 separate websites will worsen the user experience of their sites. Link to comment Share on other sites More sharing options...
Guest Hester Posted September 19, 2011 Share Posted September 19, 2011 I'm not convinced that it is possible to have a decent moat in the streaming business. with DVD, at least they had lots of expensive infrastructure and could be the low cost producer in the way that COSTCO or Amazon is.. With streaming, all that keeps people coming back are the brand, quality of service, and price. If they screw up any of those too badly, people can easily switch, and competitors can more easily set up to compete (especially those who own lots of content - that's the only real kind of moat in streaming). I agree and the recent trouble for Netflix with content providers is evidence that we're right. I see no reason why a platform that streams content should make abnormal profits, when they have little physical investment and don't actually create any value, just distribute it. Not only will competitors be coming at Netflix, so will the content providers. Link to comment Share on other sites More sharing options...
abcd Posted September 19, 2011 Share Posted September 19, 2011 And again, splitting it into 2 separate websites will worsen the user experience of their sites. I know you were saying that all the user experience data that has been captured will be split into two. But I personally don't think it is going to happen. What is there to stop them from using the same database and allow two different sites (Netflix.com and Quikster.com) to operate out of the same database? I mean, do you see any legal implications in that, after all, they are two divisions of the same company? I agree with Liberty, I don't like the name Quikster.com, it sounds like a reincarnation of Amway. Link to comment Share on other sites More sharing options...
Guest valueInv Posted September 19, 2011 Share Posted September 19, 2011 I'm totally puzzled by NFLX's recent moves, but it has always been way too pricey for me, so I never owned any (and I don't short) and so it has no impact on my wallet. Just spectator sport for me. I'm not convinced that it is possible to have a decent moat in the streaming business. with DVD, at least they had lots of expensive infrastructure and could be the low cost producer in the way that COSTCO or Amazon is.. With streaming, all that keeps people coming back are the brand, quality of service, and price. If they screw up any of those too badly, people can easily switch, and competitors can more easily set up to compete (especially those who own lots of content - that's the only real kind of moat in streaming). It makes sense to want to de-emphasise the DVD side of the business, but IMO they were a couple of years early and they did it badly (Qwickster? wtf?). Here's one explanation: http://abovethecrowd.com/2011/09/18/understanding-why-netflix-changed-pricing/ They may not have had a choice. Link to comment Share on other sites More sharing options...
Liberty Posted September 19, 2011 Share Posted September 19, 2011 I know why they had to increase prices and (at some point) deemphasize DVDs, what puzzles me is the execution. They've been pretty savvy so far, so it's surprising that they seem to have lost their touch recently and everything they do seems to be digging a bigger hole.. Maybe it'll turn out to be just a temporary problem, but even if that's solved, it doesn't solve the lack of a moat. There's some interesting discussion here: http://news.ycombinator.com/item?id=3012214 Link to comment Share on other sites More sharing options...
DCG Posted September 20, 2011 Share Posted September 20, 2011 And again, splitting it into 2 separate websites will worsen the user experience of their sites. I know you were saying that all the user experience data that has been captured will be split into two. But I personally don't think it is going to happen. What is there to stop them from using the same database and allow two different sites (Netflix.com and Quikster.com) to operate out of the same database? I mean, do you see any legal implications in that, after all, they are two divisions of the same company? It says it right in Reed's blog post: "A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated. So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa." http://blog.netflix.com/2011/09/explanation-and-some-reflections.html Link to comment Share on other sites More sharing options...
given2invest Posted September 20, 2011 Share Posted September 20, 2011 I know why they had to increase prices and (at some point) deemphasize DVDs, what puzzles me is the execution. They've been pretty savvy so far, so it's surprising that they seem to have lost their touch recently and everything they do seems to be digging a bigger hole.. Maybe it'll turn out to be just a temporary problem, but even if that's solved, it doesn't solve the lack of a moat. There's some interesting discussion here: http://news.ycombinator.com/item?id=3012214 Yah, I think this is exactly why they did it. Reed is way too good of a CEO/business man to have fucked this up unless he was basically forced to do it, which is what I think happened. Link to comment Share on other sites More sharing options...
Liberty Posted September 20, 2011 Share Posted September 20, 2011 Bloomberg had a profile of Hastings and he did seem very smart and competent. Maybe there are some things we don't know that make the situation much harder for him than we think.. But still, I have a hard time seeing how he could have been totally forced to do this Qwickster stuff, or even raise prices in exactly the way they did.. Link to comment Share on other sites More sharing options...
abcd Posted September 20, 2011 Share Posted September 20, 2011 It says it right in Reed's blog post: My bad. You are right. I had, particularly, missed this line. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa. Link to comment Share on other sites More sharing options...
given2invest Posted September 20, 2011 Share Posted September 20, 2011 It says it right in Reed's blog post: My bad. You are right. I had, particularly, missed this line. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa. That parts the funniest (saddest) bit of the day. Link to comment Share on other sites More sharing options...
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