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Netflix Stock Drops like Subscribers from their Rolls

Netflix came out with earnings today. Despite beating analyst expectations, the stock is off 15% in after hours trading.

While Netflix's losses weren't as bad as what analyst were expecting, what is doing in the stock is that sales are coming in much softer than expected. This is no doubt due to the fact that many people have become dissatisfied with their Netflix service and have looked elsewhere to get there entertainment.

This should be lesson #1 on how fast fortunes can change for a business. It wasn't too long ago that Netflix was a darling to most, myself included. It was one of those companies that just kept churning out innvoation and doing right by their customers. I still look at some of their business and hiring philosophies as a model for how I plan to do things in my own startup.

But it seemingly all started to fall apart with one single move, Qwikster. Since then, the sentiment on Netflix has done a 180. It went from the company that could do no wrong to the company that can't seem to get out of its own way.

Although I didn't have the same strong negative reaction that most had to the Qwikster debacle, I can be counted as among the group of people that is no longer a Netflix customer. A few things conspired against Netflix for me to stop using it including cutting cost to start my own company. But more important than that was simply I wasn't a satisfied customer of their service. Streaming was a joke and since this is where there focus is it became a bad deal. They continuously made concessions on their DVD side including delaying of releases and increasing prices. That became that and I stopped my subscriptions a few months back.

Can anyone else remember a company's where sentiment seemed to change overnight and so violently. Do you think Netlfix's best days are behind it? If you are still a subscriber, what keeps you sticking around?
Brandt Lovell's profile photoThom Stricklin's profile photoScott Greenway's profile photoDavid Shellabarger's profile photo
I think there's only one lesson: if you have a service that is profitable and works fine don't touch it. Create a new service if you must satisfy inner "but I'll earn MOAR money if only ...", but don't try to "improve" things (unless you're loosing money, then you don't care).
Can anyone else remember a company's where sentiment seemed to change overnight and so violently?

Digg. GoDaddy. But it's a rare thing.
I too am mulling dropping Netflix since Amazon Prime has pretty much matched them, and I have had same two DVDs sitting in my TV area for 2+ months or more.
Still a Netflix customer, but not a happy Netflix customer. I would drop them if were not for my kids watching Netflix and already familiar with it. I don't have time to show them another service and it keeps them quiet. I fully intend to drop them, as it is only a matter of time, they messed up big time. They just can't seem to get things right currently.
+Gary McAvoy True. Well, many companies have suddenly become bankrupt over the years. Sentiment turnarounds, not so much.

A similar thing happened with Yahoo's Flickr sunset memo, more complicated as people still liked Flickr, but Yahoo scared away a lot of loyal users with it.
I have to say the whole Qwikster thing did make me very unhappy with Netflix to the point where I seriously considered unsubscribing. Now I did eventually unsub, but that was more due to economic factors than anything else. I am now subscribed to Netflix again, but only the DVD part of the company. I get my streaming elsewhere. As to why I returned to Netflix, it seems to me that there really isn't a company around that has the DVD selection they do. Blockbuster seems as if they only concentrate on more recent movies--they wouldn't have many of the more obscure and older titles I like. ClassicFlix seems to be the opposite of Blockbuster--they concentrate on older titles. Netflix has both.

At any rate, I don't know if Netflix's best days are behind them or not. I think they will really have to start doing things better if they are going to regain their reputation and much of their business.
I still use Netflix. I dropped their DVD service when they raised prices, mostly because I didn't use it much anyway, but Netflix's streaming service is the best deal around despite it's flaws. I turned off my cable in favor of Netflix, and at 10% of the cost of cable, I'm very satisfied. I've looked at Amazon Prime, and, although it's slightly less expensive, it doesn't offer the selection of Netflix just yet.

I'm not loyal to Netflix, mind you, if I ever find a better deal, I'll jump on it.
Let's say I'm not a happy Netflix customer:

what offers a similar amount of streaming (total available hours, let's not pretend we have the same idea of "good", OK?) with the same options to view (PC, Game Console, Mobile) for the same price of $8/month?
I thought Netflix was great until the end of February, then they lost all of their content from Stars. We dropped them after that.
I subscribe for one reason and that is for my kids shows. I don't watch television so we don't want cable.
Their selection of Documentaries and International films keeps me locked in. As well as the the tv series available and their move into content production. I've abandoned tangible media pretty much across the board. Their streaming service has yet to let me down.
I was concerned about the loss of Starz myself, +Shawn Morgart, but after Starz was lost, I found my instant que had went from 137 movies to 135 movies, and I can't seem to recall which 2 movies were lost. Starz wasn't offering me much.
Still use Netflix but the lowest priced DVD service. I use Amazon prime so I get VOD as well which is good for family movie night.
Thanks +Colin Fosgate +Mike Wong +Erik Orgell for reassuring me I'm not crazy to think $8/month is a awesome deal.

Even with Hulu and Amazon Prime accounts, I still spend 95% of my time watching Netflix.

Given I have a DVD collection (big enough that I don't want to count to prevent crying) so if there is gap I can always fall back on that.

With all the gloom and doom about Netflix, I just don't see any other replacement for me or see where people are running off to replace it with.

Then again I don't pay Apple to lease music, buy tv shows I could have watched for free or rent movies so I am a bit of an oddity in 2012

Oh and I still have library card if all else fails :)
Ted S
In hindsight I think Qwikster's real fault was causing people to think about their value. A few dollars didn't change the world... but it did get people to think about what they were paying for.

In the comments I've read few people talk about the DVDs being an issue... Rather it's the usage (having to plan) of a DVD versus the selection of streaming. To me it's a good value (history channel, shows) but I have no cable to offer as an alternative.

It's a good lesson in value. You don't have to be expensive to be percieved as less worth it. Less doesn't have to cost you the business, but just a 5, 10% shift in customers is major.
+Terrence Lui I'm curious what hiring philosophies you're using from Netflix. Almost all engineers that I've talked to or have worked there talk about how their hiring process is severely broken. They pay higher than normal salaries but are fast and loose with letting people go after mere quarters. This high churn would only frustrate the engineers who managed to stick around.
+Melissa Hamilton , thanks for that link. I didn't know that existed and have been looking for a way to find a few good documentaries!
I'm still a happy Netflix customer. I wish their movie selection would get better, but honestly I've gotten far greater enjoyment out of watching the TV shows on streaming. They've got a very good selection of shows that has kept me watching something (alternating between at least two shows) nightly for months. I do not have cable, but these days I have to check myself when I start to say "I don't watch TV". Now that I've got a sufficiently beefy Android for mobile viewing, it's become even more the case.

I could understand a fan of their DVD service being disappointed in Netflix and leaving. But I've been ready to quit DVDs for a long time. I completely understand why the Qwikster fiasco was so tempting for them--had they not mishandled it, I think it would actually have been the right move.

At the same time, I'm not a fiercely loyal customer. I would consider anyone else with the features I require in a streaming subscription. I have considered Amazon Prime, but the big annual payment and the opaqueness of what content is freely available through prime has kept me from trying. Even still, I could imagine picking up Prime in addition to, not in lieu of, Netflix.
+Pras Sarkar , I too have talked to people at Netflix and can understand why some people get frustrated. I don't think its the perfect model but I do think the philosophies are right albeit the practice of it is more difficult.

For example. Netflix is about trust and responsibility. They don't create big processes to try and "control" their workers. This can be extremely frustrating for some people because people want "rules". This is normally because when there is conflict, someone wants to point to a "rule" to say they were "right". All most rules do though is to create roadblocks to the people who are just trying to do the right thing.

Also, things like paying above market rates for above market talent makes pretty good sense to me. Further on the "trust" theme, they don't track vacation. Neither does my startup. We just take vacation when we want to take vacation. We hire people who enjoy their job and want to work. If someone abuses the policy, its going to be pretty evident and we would rather deal with the person than create an onerous process for everyone else.

These are just a few examples, but there are many more where I think Netflix gets it right in theory. Whether they get it right in practice is debatable.
+Terrence Lui I watch very few movies, so I have never been a Netflix user. But regarding a company that experienced a quick change from prince to pauper, I'd have to say it seems to me that Sony is headed down that path. I realize that a lot of people hate Sony. I like their cameras which is the primary reason I am a Sony fan. But whether you like them or hat them... boy have they taken a walloping as of late. Their smartphones are meh and Apple ate their creative lunch years ago. It just seems like they are moving backwards and I will be surprised if even their most recent restructuring can save them.

They need a big leapfrog event, just to change people's perceptions of their technological prowess. This assumes they still have it, of course. :-)
+Jerry Johnson , Sony's demise doesn't seem as precipitous to me but I agree they have fallen from grace. They used to stand for must-have quality products. I used to have lots of Sony products, now I only have my PS3.

I think they made a few big mistakes. They lost so much ground to Nintendo and Microsoft by putting too much emphasis on Blu-ray and hardware performance rather than what people really cared about (innovative game mechanics and online gaming). They also lost their way in the mobile device market. I owned a Sony Ericcson phone way back when which was great but they let Apple run away with the position that should have been theirs.
Well said +Terrence Lui. They just seem scared to me when I listen to interviews of their execs. It's a feeling vs. logic I think.
They lost me with their attitude of the price change. I kept streaming and I find it great value, lots of unique content if you dig for it. Check out their orginal series Lilyhammer it's good
Streaming is the only thing I use it for now.
+Blair Warner , I found the streaming selection really lacking. What types of things do you stream?
I also found the streaming selection very poor and uninteresting in titles that had any relevance to my interests. Netflix is past it's peak in my opinion.
The selection of TV shows on Netflix streaming rules, IMO... I'm not sure if there's a sustainable business model in that, but I like it.
SELL SELL SELL!! Also a bunch of the big cable companies have been tooling up to take on Netflix. Something better will come along soon and everyone will jump ship, they wont be the best, they just got there first!
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