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Reed Hastings’ Apology Fails To Stop Stock Slide
Hastings Says “I Messed Up”; DVD Unit Will Split, Rebrand As Qwikster
The Netflix situation is becoming scary. The stock was down another 9.4% today, to $129.66. That means the company has lost 55.4% of its value since July 11, the day before it announced its decision to split the streaming video service from DVD rentals — upping the subscription price by 60% for those who still want both. Yesterday, CEO Reed Hastings apologized for his PR blunder by trying to gloss over that fact. He adding that the DVD-rental business will have a new name, Qwikster, and begin to rent video games as well. How low can Netflix go? Caris & Co analyst David Miller today slashed his target price to $103 from $185 and made his second downgrade in a week. Last Friday, he considered Netflix an “above average” investment. Now he says it’s ”below average,” noting that the odds that the company will soon have its first quarter with $1B in revenues — which some analysts have expected — “are now fleeting at best.” Lazard Capital Markets’ Barton Crockett, who is neutral on the stock, called the Qwikster decision a “stumble” adding that many consumers will “be confused and never find the Qwikster website.” But Barclays Capital’s Anthony DiClemente maintained his recommendation for investors to “overweight” Netflix stock which he says could hit $260: Although moving the DVD business off into Qwikster “does add uncertainty” in the short term, he notes that it frees Netflix to make better decisions for video streaming — including ways to optimize its user interface for iPhones and iPads.
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While Netflix is busy making a better interface for iPhones and iPads, after ten years of being a customer, I am dropping Netflix for Blockbuster’s mail-DVD plan. While the Qwikster change irks me, what makes me more upset is that AGAIN I found out the news about my Netflix account changing via Twitter BEFORE I even got sent an email from the company about it.
For streaming, I have HBOGo which has better quality movies, HD streaming, AND great TV shows (Good luck with your Dustin Hoffman TV show Netflix with what subscribers you’ll have left).
I think you mean Kevin Spacey, not Dustin Hoffman. Netflix is doing a show with Spacey. HBO is doing a show with Hoffman. So you’re in luck!
I’ve done exactly the same and I was also a 10-year customer.
I find it ironic that Hastings, who founded the company, is the same person who is destroying it.
“what makes me more upset is that AGAIN I found out the news about my Netflix account changing via Twitter BEFORE I even got sent an email from the company about it.”
Um, yeah. So, find a faster email service then. Or better yet, become a journalist and develop your own inside sources.
Jeez louise – in this day and age most everything is going to break on Twitter before email or traditional news outlets. If you get angry every time that happens, you might as well stop monitoring Twitter, or you’re going to stroke out at some point.
I experienced the same thing. No email, just saw the increase on my Bank Statement, although yes, I knew through news reports that rates would be increasing.
I think what he means is, as a customer, there is an expectation that you will be notified about a rate hike via an email before the rate hike happens. It’s SOP in business to notify customers when there is a change to the terms of their agreement – most companies do this. It’s bad customer service on the part of Netflix not to communicate directly with their customers. No wonder people are leaving.
I can’t STAND the embarrassingly overused quip “EPIC FAIL”! That said, this little change Netflix has decided to make is a failure of TRULY epic proportions.
At this point, if Netflix wants to stop the hemorrhaging, they’ll need to oust Hastings and return to what they were with a formal apology that is actually sincere.
Saw that an analyst compared NFLX to Krispy Kreme stock, and I think that the hate has gone too far. Online consumption of content is not a fad, like the certain type of donut. The PR blunder part of it is obviously front and center right now, but it seems like Hastings is really smart dude who is forward-thinking – hard to bet against him certainly long-term. But the short-term volatility is likely to be high.
Krispy Kreme was crushed by its desire for national expansion right as the diet craze was kicking in.
Krispy Kreme is a friggin’ AWESOMELY delicious donut for a pretty inexpensive price. Netflix is now an expensive service for scratched DVDs with “Very Long Wait”s and a pretty decent library of streaming movies that don’t play that clearly and is about to be hurt by the Starz deal.
eh, I’m a streaming subscriber and it’s usually the Starz movies that sucked quality wise, I’m really not all that bummed about Starz leaving.
I agree, but then you have to consider what percentage of the Netflix library was made up of Starz movies. I truly don’t know, but I DO know that the majority of the movies I streamed were Starz movies.
Good news – no more crappy quality
Bad news – no more library!
NEVER say anything bad about krispy kreme!
I think Reed Hastings greatly underestimated the concept of inertia. When he’d announced the price rises earlier in the year, I was slightly irritated, but frankly, was convinced that it was still a decent deal AND the convenience of having both services on one site was a plus. Inertia won out and I stayed put. Now that I have to add another website, I am inclined to see which two complementary services might serve me as well as the combined Netflix and Qwikstir. Perhaps others are feeling similarly?
+1 from me. I frankly didn’t care about the price hike — it was still the best deal in town, especially compared to the highway robbery that is cable. Where I started to sour was when I heard about the Netflix/Qwikster split, a.k.a. purposefully making things more difficult for your customers because you got sick of mailing DVDs all the time and want to sell that part off.
Quite annoying, especially since I’d been defending them.
You can’t stand the overused “EPIC FAIL”? How about the overused and meaningless “that said”?
“that said” is actually a substitution for “but” which is even more overused
I will buy at $80.
I think this is a classic case of corporate greed and stupidity backfiring big time. Usually greed is visited upon the customers without their chance to do anything, but in this case the stupidity levels were so huge that, arrogantly, the company managed to alienate its entire client base in one stroke and revealed itself to be a unstable, fickle and risky option to investors who want their money in companies that actually know what they’re doing. Netflix, who made its business by devaluating product out there for other companies, has come to the point where it soon will be rendered obsolete. The clients, and the the smart money, have woken up and smelled the coffee, and it’s not fresh. Somebody peed in it.
I don’t mean this as snark or an attack on you, but I see everyone posting about “corporate greed”.
Well when Netflix says that their licensing deals would go from costing around $300 million to $3 BILLION dollars?? Where would they get that money without raising prices? I still think it’s a good value (I have 3 discs plus streaming) for what you get in return.
I’ve been a customer for 8 years or so, but the thing that actually now has me looking to canceling is the “two websites, two queues”. What the hell, I liked the integrated services, splitting them I have no interest in.
That’s what people keep forgetting in all this moaning and groaning about the price change. The studios control the content and they do not give it away. This is their new revenue stream to make up for declining DVD sales. Where else are customers going to get anything close to a recent movie or TV series on a membership plan. Every other instant video site out there is PPV. Do they want Netflix to go that route? Doubtful.
Netflix has become the new Tivo: great product squeezed in the middle between the content producers on one side, and the cable providers on the other.
And like Tivo, their position is indefensible. Another once great brand bites the dust.
At least Hastings could have milked the DVD/Blu-ray cow for awhile; instead, he slaughtered it.
I am done with Netflix. It’s bad enough that my price for having this shit is now
approaching thirty bucks, but now I have to have two separate charges, and use
two different sites? Um – no. Remember this day because years from now they
will point to it as the day that Netflix buried itself once and for all. Just when we
thought Blockbuster who? Now we say welcome back Blockbuster. Missed you.
Big hug.
With HBO and Cinemax utilizing streaming and I would guess STARZ and SHOWTIME are planning the same thing, so there is no need for Netflix. Personally I WANT THE DISCS. Streaming is awful unless I curl up and watch something on my laptop. I stopped Netflix a while ago when it became clear they were not interested in me getting discs. Netflix just started to get too greedy, they alienated long time supporters and now just keep stumbling. They had their day in the sun. Now it is everyone else’s.
You’re right, but in order to access HBOgo or MAXgo you have to be a subscriber to the premium services through a Cable or Satellite provider. That costs, what, $29.95 for the cheapest intro plan? Add $10-$14 a month for the premium channels? Hhmm, $14.98 for both services with greedy Netflix sounds pretty cheap to me. Of course, you’re never going to get streaming of recent seasons for series on channels like HBO or Showtime because they want you chained to the cable/satellite provider. So, good luck with Blockbuster.
Chose my handle – Soon2BFormerNetflixCustomer – after the July announcement. More accurate handle would be FormerNetflixCustomer.
We used Netflix because of the combined coverage of DVD and streaming. Their streaming content tended to be old, B-grade or less, with technical hiccups and serious gaps (as others have noted – 1 of 100 recent Oscar winners, 2-3 year delay on some TV series, loss of Sony/Disney on horizon). We were willing to put up with the craptastic streaming offerings because the DVD selection was much broader and filled in the gaps. We rode out the first price bump mainly on inertia.
The new combined price didn’t meet our value proposition so we overcame that inertia and started shopping around.
We’ve now moved on to a streaming service from one vendor and DVD/BluRays from two others that still costs less than Netflix’s old price.
Would we go back to Netflix? Given how absolutely clueless CERO Hastings has been – how completely tone deaf to his customer base – I don’t think so. I don’t believe we’re in the minority on this either…
Am I the only one who starts craving Nestle’s Quik every time I read about this new venture? I agree with the comments, even though I’m not a Netflix customer, and am actually glad to see karmic payback happen so quickly – no pun intended.
Guys, I think you are ALL underestimating Reed Hasting’s true genius in all of this.
He WANTS Netflix to fail so that customers will flee to Blockbuster and revitalize the dying company.
Once Netflix’s stocks plummet further and he is ousted as the CEO (but not without a huge severance package), he will then take over as Blockbuster’s new CEO.
Wow. This guy truly knows what he’s doing and we’re all buying into it.
I have been upset for quite awhile for their lack of customer service (phone only) with no way to send them an online inquiry. I don’t want to stay on the phone for a long time talking to somebody. They say they keep their website slim on features because it is easier to use, but I find it annoying to do what I want to do. Also their streaming is annoying because I want to control at what level of quality I want, whether I want high definition, lower definition, etc. Then I can choose that I want to wait for it to buffer.
i agree with you completely — why are we not allowed to email our customer service issues — what are we back in the 90′s???
In a weird way, this whole thing is actually really smart and who knows — maybe they planned this all along? Once Netflix goes to a streaming only service, there will be an enormous amount of pressure for studios to release their movies streaming, instead of DVD only. Basically, this is a move to kill DVDs and thus cut the company’s overhead. And threaten the cable companies. If this move works, they’ll emerge on top. That said, it could fail. But one thing is clear: this company is going to war right now. And if I had to choose between Netflix and the cable companies I’m backing Netflix. But that’s me….
I think you’re totally right — it is a strategic move designed to counter the Studios’ refusal to sell streaming rights at reasonable prices. That said, I think it is a move that completely abstracts the consumer (i.e. pisses off all Netflix’s customers) and is also unlikely to work on a strategic level.
Netflix alone doesn’t have the power to kill the dvd — as Netflix subscribers cancel because of the Qwikster debacle, they can migrate to Blockbuster, Redbox and old fashioned video stores (plus, maybe, start actually buying DVD’s again). Meanwhile, other companies (Amazon, Yahoo, Google, Apple, etc) are going to begin competing in the streaming market, which will help Studios keep prices UP.
So, though I think you’re right about the motive, I think it’s a big mistake by Hastings. And I will be cancelling my account once the Qwikster segregation starts.
Movie studios have already excluded/stunted Netflix from receiving their new DVD/Blu-ray releases. Why would they want to support streaming if the Netflix user base continues to decline whenever Hastings is “forced” to raise prices? As Netflix tries to expand and get more content, that means more funding needed for licensing, and that just means studios will reach fewer customers.
Maybe a few studios will take the plunge, but I don’t see that being a widespread concept. I imagine most movie studios are glad that Netflix is beginning to tank, as it puts more control in their favor.
I’m going back to blockbuster. I do not want to deal with two separate sites. Totally unnecessary.
Why is everyone making such noise over this. The DVD market will die, probably very soon, everything will be streaming. Netflix is cheaper than cable, by far. Old people will still want DVD’s, so someone should cater to them. The price thing is easily summed up. Consumers don’t want to pay with the studios think their product is worth. It’s not Netflix’s fault.
I agree with you generally, but pertaining to Netflix, I find the streaming quality not so hot. And not all of the movies are even HD, so hopefully this move would let them improve that service? (I hope lol)
It’s not just “old people” who like DVDs, it’s anyone who likes special features, subtitles, and high picture quality (not everyone in the country has fast enough internet to stream DVD quality playback). Not to mention the fact that the vast, vast majority of the content on Netflix isn’t available on streaming.
The price hike for the combined services actually led to a reduction in price for DVD only service, so I signed up to give Netflix a try. For me the issue isn’t the two sites or the price, but the fact that one out of every four DVDs I received was unplayable due to being scratched or broken.
Netflix is cheaper because it offers less, at least in terms of what I absolutely want to watch. Comparing them isn’t really fair. Anyways, it’s not going to go streaming only “very soon,” as a lot of Americans don’t even have high speed internet. And even those that do have to deal with data caps from ISPs. I can’t imagine how much bandwidth it would take to stream a Blu-ray quality movie. The change will only flourish when it’s available to the majority of the population. To your last point, not even Netflix can afford to pay what the studios think their product(s) are worth– hence this price hike, fragmentation, loss of customers, PR battle, etc.
Streaming is the old dial-up. People put up with it because it was new and cheap. Now the public has their HDTVs and want QUALITY. DVD quality and extra content, along with the Blu-Ray, simply won’t get pushed aside. Netflix gave everyone a nice ride and it was good while it lasted.
Now we wait for someone to do the home-theater-content version of the $5 Footlong.
I agree completely. Movie lovers who are truly interested in quality will eschew the crappy streaming selection in favor of a truly ownable disc packed with features. Discs ain’t going nowhere.
If people took the time to compare Dish Network’s Blockbuster and Netflix and ALL the rest including RedBox they would find that Blockbuster is NO value, like WalMart’s Vudu. as far as RedBox if you rent more than 8 movies a month then Netflix is STILL less.
People need to forget all the crap and anger and COMPARE PRICE on DVD’s Blockbuster is 2 bucks more a month for one out at a time.
Eight new releases a month vs. an unlimited supply of streamed crapola? I’ll take Redbox, my man.
Not being able to email them has been a sore point for me for years. If I want to ask a question at 3am why should I have to dial a number and talk to some chirpy person on the phone? So antiquated, so lame. For that fact alone I am happy they are getting this spanking, however temporary it may be.
WAIT. Don’t use Netflix alienating its customers to breathe new life into Blockbuster. The ol’ yellow and blue screwed customers FOR YEARS, and also rented them content-edited, pan-and-scan movies.
I know, right? Blockbuster is a terrible company.
This is a decision you make when streaming quality can reliably approximate that of physical media (in technical quality and availability). They are essentially forcing an inferior product on the customer base they built with physical rentals. The pushback has everything to do with that and not cost.
This is also what happens when you take a company public, which frankly I don’t know why anyone would do unless they want out of the business they built. This is a move to spin off and dump/sell the DVD rental arm for the better cost structures of streaming, which exist only on paper at this moment in time and not in the real world yet. ISP’s are hammering their customers over bandwith, the studios are hammering Netflix over content and Netflix itself is hammering it’s customers into discrete camps. Frankly the most ominous factor in all of this is the statement that existing customers now have to manage two accounts over two sites that don’t talk to each other. How can any person see that as being “easier” for the end user?
I know there are all kinds of people out there that love their instant gratification and cell phone cinema but that is a segment for growth, not the endpoint of growth. People have HDTVs and Blu-ray players in their homes and are being force fed bargain bin libraries with ham radio delivery quality. Playing to an audience satisfied with that is a surefire death sentence.
Are we the only customers here who have had no problems with Netflix? We subscribe to two DVDs at a time and streaming. This week we’re watching Season 4 of Mad Men and the quality is excellent. No issue with the price increase either – beats the hell out of making monthly DISH payments.
I use streaming via my Xbox 360, and it works pretty flawlessly for the most part. They have an integrated party system and such on there, so it’s actually pretty neat. My biggest gripe is that that the selection is severely lacking. One would think that the price hike was to go streaming only, but it doesn’t seem like that’s the case. It seems like Netflix is still trying to figure out what they want to do and are making it up as they go along.
I still don’t get how someone can apologize and recognizing how upset people were — and proceed to do nothing? It’s such an empty apology. It was done to please shareholders and it didn’t work. I doubt that they were losing money from the dvd/streaming combo. Go back to what works. On top of that bring back email customer service.
Agreed. It’s even crazier after watching Hastings on Charlie Rose earlier this year (which I highly recommend). He seems like such a smart guy, and seems to have a great vision of what the future of media consumption will be like down the road. All of the garbage that has happened since that interview makes no sense to me. It just doesn’t add up.
Why should they go back to the old pricing? The people that want DVD only got a price DECRESE, If I want one DVD only, why should I have to pay $9.99 instead of $7.99 that’s just plain stupid. If I don’t use streaming then I’m paying $2.00 more for what? NOTHING
Faceted Jewel, you are very wise.
A few bucks a month for thousands of rental choices. Cheaper than a visit to the concession stand or buying a new dvd. What’s the problem?
This is all very interesting in a sick and pathetic way. While the corporate media titans battle it out on their digital Mt. Olympus, the less advantaged consumers of the world can count on ultimately getting screwed. Does anyone here even realize that paying an average of even $80 a month for access to streaming content is well out of the budget range of MILLIONS of Americans, let alone BILLIONS of human beings on this planet? Most people don’t have a giant HD screen and/or a kick-ass computer like a Mac. So Reed Hastings might get “ousted” and welcome back “good ol’ yellow-and-blue Blockbuster”? Who gives a shit? Now most economically disadvantaged folks can throw out the DVD player next to the old TV rabbit ears in the backyard and wish they didn’t have to buy food for their kids instead of seeing the latest highly-publicized media drivel. Christ, maybe this will get people to start reading books again.
80 bucks a month for streaming? He didn’t raise prices that much lol.