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Netflix Stock Price Tanks As Customers Quit Over Higher Prices (theverge.com)
An anonymous reader writes: Netflix released its earnings report (PDF) for the second quarter today, where it reported $1.97 billion in revenue and net income of $41 million. The company did however report only 1.54 million subscribers, which is below its projections of 2.5 million new subscribers. As a result, stock is down around 14 percent in after-hours trading. "Our global member forecast for Q2 was 2.5m and we came in at 1.7m. Gross additions were on target, but churn ticked up slightly and unexpectedly, coincident with the press coverage in early April of our plan to ungrandfather longer tenured members and remained elevated through the quarter," Netflix wrote. "We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering." The company defended its price hikes, writing that "while ungrandfathering and associated media coverage may moderate near term membership growth, we believe that ungrandfathering will provide us with more revenue to invest in our content to satisfy members, thus driving longterm growth." In the past, Netflix gained 13 million new subscribers in 2014, and 17 million in 2015. Comcast will reportedly allow Netflix onto its X1 platform, which may entice more customers to the streaming service.
The real reason for people leaving Netflix is the blocking of VPNs and proxies and the dull nature of Netflix original content.
In the free world the media isn't government run; the government is media run.
I pay $9.50 a month for Netflix and it is better than either HBO, Showtime or Starz. If they jumped up to $12. per month i would not blink an eye. Meanwhile my cable bill is $220. per month.
Likely their crackdown on VPNs and foreign subscribers has also contributed somewhat to the churn.
If they'd let paying customers, you know, be paying customers then maybe they'd be in a better position now.
Pay attention to the summaries, you nitwit!
"I don't know, therefore Aliens" Wafflebox1
Not because of the price, but because of the lack of content.
This story is not about people leaving. It's about them not getting as many NEW customers as they thought.
Of all the streaming services, Netflix has the highest member retention.
You are welcome on my lawn.
Netflix is at $85 after this big after-hours drop. On June 27, they were...$85.
Technical traders (the ones who use charts to predict, no matter the news) will buy like crazy tomorrow.
You are welcome on my lawn.
I seem to remember being told at the time that as a current subscriber I would be able to keep my current rate for a rather long period of time...ah yes here it is 5/9/14 "Hi user,
In order to continue adding more movies and TV shows, we are increasing our price from $7.99 to $8.99 for new members. As a thank you for being a member of Netflix already, we guarantee that your plan and price will not change for two years.
You can review your membership details at any time by visiting Your Account. As always, if you have questions, we are happy to answer them. Please call us at any time at 1-888-357-1516.
â"The Netflix Team"
So a bunch of people just forgot they had a very generous 2 year warning of a price hike and were caught unawares? I wouldn't call it ungrandfathering as It was a time limited price guarantee.
Ungrandfathering is when the city decides your house built in the 1850's is too close to the road and must be demolished in 2016 dispite being grandfathered in on the new rules in 1975.
Minimum threshold fixed. Thanks!
December, when I made my annual "where the hell is my money going" study, realized Netflix had nothing I wanted to watch. Except for House of Cards, but considering I could get the DVDs 6 months later for free from the library kinda made the decision easy.
People are bailing on Netflix due to content restriction and the killing of VPN. Still more economical than YouTube RED!
You're dead wrong. It's right there in the summary: "Gross additions were on target, but churn ticked up slightly and unexpectedly."
Honestly I could cancel the dvd plan and wouldn't notice, but certain members of my family insist on having it (even if they barely use it, go figure).
That's the way it's always been for most people, which is how Netflix was so successful for its first stretch in the early 2000s. Only a minority of customers would receive and send back multiple DVDs each week -- most people would get some movie they were told was "awesome" and it would sit on a shelf for a month. I remember some comedian even doing a shtick about people who'd get all these "classic movies" from Netflix on DVD that they never would have been able to find at a local Blockbuster, but then they'd end up sending them back unwatched a couple months later.
Retirement funds are buying most of the tech stocks. Some of them have the problem that they have another billion dollars every week that they have to invest in tech stocks and there just aren't that many good investments so they dump it into well know tech players. It is even worse in the UK where one type of high growth fund only allows investments into 200 companies that are registered in some government scheme. Some of their stock prices seems to have nothing to do with any type of value.
Is fear and greed. The fearful will be selling into unnecessary mania, created by an after-hours market with questionable liquidity. The whole "event" is a designed opportunity to create trades. The market profits with the increased volume. The event becomes news and the media gets their share. The market makers make it on the spread and volume. The sharks get fed by the minnows. The institutions filter-feed on the buying opportunity created by shaking out of the fearful.
And so it goes until the "next" news opportunity arrives for the news to sell.
Quite honestly the chart shows a strong long that the institutions will surely be happy about. But what do I know?
09 F9 11 02 9D 74 E3 5B - D8 41 56 C5 63 56 88 C0 45 5F E1 04 22 CA 29 C4 93 3F 95 05 2B 79 2A B2
The real reason for people leaving Netflix is the blocking of VPNs and proxies and the dull nature of Netflix original content.
These are valid points to some extent. Netflix's original content isn't that bad, but the fact is that they were formed as a content distributor, not a content producer. And that's the real problem... they have no content to distribute. Netflix has jack shit to watch, whether you have a working VPN or not.
This really hit home about 5 minutes ago when I ran across http://www.cinesift.com/ via a link on HN. Look for the red "Netflix" buttons and you'll see maybe one or two in the first several dozen listings. Those are among the highest-ranked films of all time, across numerous genres. Almost none of them are available on Netflix. Meanwhile, Amazon Video lets you access almost all of them.
If Netflix is going to survive, they cannot simply rely on offering a pathetic assortment of B- and C-level movies for a flat rate of 12 bucks a month or whatever. What they are doing is not working, and it's time to stop trying. They have to start offering optional premium content. I see no other strategy that will keep Netflix from being destroyed by more clued-in players, including but not limited to Amazon.
They do have great content, but for Sense8 I gave up after that scene where they zoom on a dirty dildo. I'm all for creative freedom and I appreciate that they depicted all kinds of lifestyles, but that scene was just a cheap attempt at creating some kind of buzz. I don't mind graphic scenes but I do mind feeling like my "queer sex tolerance threshold" is tested on purpose, I find that insulting and condescending.
lucm, indeed.
Whether you raise my rate because of an "impending new price increase" that you disclaim or "the completion of two years of grandfathering," the result is that you are requiring me to pay more now, so it is the same either way for the consumer, duh. Of course the price increase is minimal and not my main reason for cancelling service last month, but it surely doesn't improve my experience. I cancelled my account mainly because Netflix is soooo ungodly slow to add new content, and I have long since burned through most of what I was initially interested in (I'm picky and don't just watch everything that is available). It also doesn't help that the interface on my Android media box is so incredibly awful with a remote, but it is more about the lack of stuff I want to watch.
If I really want to dig to find something unspecific, I have an Amazon Prime account, albeit mainly for other reasons. I'm mostly content with free OTA TV, Prime, and an occasional torrent or Redbox rental, and I subscribe to Sling TV during the NBA season. So Netflix, if you don't give me any compelling reason to subscribe to your service anymore, I won't. AT&T (evil) now suddenly enforcing limits on my downstream traffic sure doesn't help your case.
This is a hacked account, for which the owner can not be held responsible.
not because of price, I'd even pay $15 per month but because they blocked my VPS/DNS service. So I cut off their access to my CC. Guess what I don't even miss it. The kids had a hissy fit but I told them hey go ahead and pay for it yourself and all of a sudden no one cared at all to have Netflix.
by TheSpoom (715771) Uncaring Linux user here. I have nothing to add to this but please continue. *munches popcorn*
Know who else has that "problem"? Warren Buffett and Berkshire Hathaway. Something like $3 billion in cash arrives in Omaha every month for redeployment. But as a master capital allocator, Buffett is happy to sit on cash until something attractive crosses his desk, i.e., no overvalued "tech" companies.
Unfortunately, the macro pattern over the last few decades has been boom-bust as easy money leads to stupid, short-sighted exuberance for shares of mediocre businesses with owner-unfriendly management (hence the non-GAAP bullshit and stock-based compensation that's somehow not an expense).
The adults in the room endure the pain of sitting on cash -- QE and the central bankers certainly make it hard -- before the the bubble de jour implodes and the markets crash back to reality. But after the party is over, patience is rewarded with bargains for shares of businesses with real, enduring, high-quality profits. Think of it as time and personality arbitrage.
I'm guessing they don't buy the store brand for their free soft drinks for employees because despite those "trillions of dollars" in subscriptions they made less than 250 millions in profit last year. That's more or less 2% of their revenue.
By comparison, here's an approx. profit/revenue for famous companies (recently):
-Alibaba: 68%
-Visa: 42%
-Google: 31%
-Apple: 25%
-Bank of America: 21%
-McDonalds: 19%
-Microsoft: 17%
-Facebook: 17%
-Verizon: 14%
-Berkshire Hathaway: 10%
-Ford: 7%
-Walmart: 3%
-Amazon: 1% (first year they make a profit)
-Exxon: 0.05%
-Twitter: -13%
-Tesla: -18% (they lose $15,000 on each car they sell)
-Yahoo: -34%
Obviously some companies with lower percentages make more profits in dollar amount (ex: Apple vs Visa) but it's interesting to see those numbers.
lucm, indeed.
So they make 2% profit. That is pretty pathetic. how is this sustainable? Their costs are so ridiculously high, that if thier income falters for a second they would need to declare bankruptcy.
Troll is not a replacement for I disagree.
You've answered your own question.
If absolute power corrupts absolutely, what does this say about renewable power?
Season 3 of Bojack Horseman. Can't wait to binge through it! Admittedly, it has been a while since I've watched anything on Netflix (or anything else on TV), so that maybe part of their problem too.
Being 'grandfathered in' to something generally means old rules continue to apply to you after a rule change. In the case of Netflix the price hike actually occurred two years ago. Any new members after July 2014 are already paying $9.99 a month for the regular package. However, they didn't increase the price for existing members (presumably to avoid a lot of people leaving). These people who kept the old price were 'grandfathered in' to their old price planning meaning they continued to pay $7.99 even though new members paid $9.99.
Ungrandfathering isn't a term I've seen before, but essentially it means time's up, grandfathering is ending. People who were grandfathered into the old price because they were existing members will start paying the increased price now.