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July 25, 2011

Netflix acknowledges significant customer backlash

Filed under: General — Tags: , — Nate @ 5:16 pm

Was watching some CNBC recently and they were talking about the upcoming Netflix results and how much of an impact their recent price hikes may cause.

I wondered over to Yahoo! and came across this:

SAN FRANCISCO (AP) — Netflix Inc. is bracing for customer backlash that could result in its slowest subscriber growth in more than three years amid changes to its online video and DVD rental service that will raise prices by as much as 60 percent.


The shortfall stems from an anticipated slowdown in Netflix’s subscriber growth amid the most radical change in the company’s pricing since it began renting DVDs through the mail 12 years ago.

Nice to see. I don’t blame Netflix for the price hikes, I didn’t like them so I quit the service, but it seems clear they are losing money pretty badly (apparently they’ve been using fancy accounting things to try to cover this up), and their licensing costs are about to skyrocket.

Netflix spent nearly $613 million on streaming rights in the second quarter, a more than nine-fold increase from the same time last year. The company so far has signed long-term contracts committing it to pay $2.44 billion for streaming rights.

So they’re doing what they have to do. Though I’m sure most everyone agrees they could of handled the situation far better than they did. They also apparently face some stiff competition in the latin america markets where they are expanding to, places where bandwidth pipes are smaller(making streaming less feasible), and cable bills are much cheaper than they can be here in the states.

While Netflix’s price hikes have gotten quite a bit of press at least in the business news recently I am kind of surprised that the same hasn’t seemed to be true of the VMware price hikes (outside of the tech community at least). The outrage continues to build..

For me it all comes down to selection – increase the streaming catalog to at least match whatever they have on DVD now and I would probably jump back on board.. in the mean time I’ll stick to cable(+Tivo), I’ll pay more but I get a lot more value out of it.

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