Yesterday, Netflix had an earnings release. The company reported better-than-expected earnings at $1.26 per share and a 52% revenue increase. According to “Netflix addresses customers ‘upset’ with price hike” by Julianne Pepitone of CNNMoney.com their earnings report dealt with angry subscribers and it sent a gray cloud over the release.
A few weeks ago Netflix announced they would be charging more for DVD subscribers; the new price for DVD and online subscription is $15.98 which is almost the same as paying for each subscription, DVD and online, separately. That subscription includes only having one DVD out at a time and for more than one, the price is higher. Netflix received a lot of anger considering the previous subscription price for both services was $9.99. That is almost a 60% increase.
The response from Netflix:
“It is expected and unfortunate that our DVD subscribers who also use streaming don’t like our change, which can be as much as 60% increase”
“…some subscribers will cancel Netflix or downgrade their Netflix plans, we expect most to stay with us”
The optimism behind the second quote could be inspired by the fact that “75% of Netflix’s new customers during the quarter signed up for streaming-only plans”. It could be that the price increase is Netflix’s way of phasing out DVDs although they claim they are standing by the DVD division. But the problem is whether phasing out DVDs or trying to cater more to online subscribers, Netflix has drastically pissed off some customers. And now the anger is going to affect earning expectations.
For Netflix to say it’s “unfortunate” that people are angry is ridiculous. I could understand a gradual increase but 60% price increase is really testing the loyalty of customers. Netflix should have done a price increase when they had no competition. Now, customers can jump ship and they won’t drown. With more competition and media content expected to get more expensive possibly meaning less content on Netflix, Netflix needs the support of its customers and their forgetting the customers that helped them with their success.
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