Netflix stock takes a sharp dive
Investors sent a loud message to Netflix today. And that message was "buh-bye."
The (once?) popular subscription-based video rental service has ruffled one too many feathers. Netflix (NFLX) stock took a plunge Thursday, dropping over 17 percent.
Full coverage of Netflix on Tech Talk
The drop is no doubt a reaction to Netflix's announcement that it expects 1 million fewer subscribers by the end of the third quarter. Yikes. As if the company didn't have a rough enough few months.
The company made a shocking decision to raise subscription fees a whopping 59 percent, from $9.99 to $15.98. The backlash set in and subscribers threatened to discontinue the service. Looks like they weren't bluffing.
Netflix socks subscribers with 59% price hike
On September 1, the Netflix's stock dropped nearly 9 percent after talks to renew the Starz Play library stalled.
Netflix stock falls as talks on Starz deal unravel
Netflix's new business model and price hike was to fully embrace the new market of consumers that stream videos rather than rent DVDs. The transition, so far, has been less than smooth.
On top of all that, the competition in the streaming market is fierce. According to a CNN analyst, "Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012."
On the other hand, Wired's Tim Carmody makes a compelling argument that the company bailed on the DVD market too soon. "Netflix could have owned these customers for years, like AOL dial-up subscribers, hanging onto them and milking their loyalty in the absence of any real competition. Instead, it pissed them off, losing almost a million," said Carmody.
We can only speculate over what is happening inside of the company, but we can imagine they're stuck between a rock and a hard place.
