Netflix shares tank amid backlash and defections

Oct 25, 2011 By BARBARA ORTUTAY , AP Technology Writer

(AP) -- Netflix shares plunged 35 percent Tuesday after the one-time Wall Street favorite revealed a massive departure of subscribers angered by price increases and other questionable changes at rental service that was created to make entertainment a snap.

Netflix revealed late Monday that it ended September with 23.8 million U.S. subscribers. That's down about 800,000 from June and worse than what the company had hinted at before. In September, the company predicted it will lose about 600,000 U.S. customers.

And it may get worse. Netflix said it expects more defections in coming months.

The exodus began after the company raised its prices by as much as 60 percent in July and split up its streaming and DVD rental services. Its website was flooded by comments from angry customers. Many people also canceled service, especially on the DVD-by-mail side. The company is betting that its future is in streaming video, and CEO Reed Hastings has said he expects Netflix's DVD subscriptions to steadily decline, much like what has happened to AOL Inc.'s dial-up Internet service.

But Netflix bungled a spin off its DVD-by-mail service, giving it the name Qwikster and creating separate accounts for people who wanted both DVDs and movie streaming. By doing so, the company created what many perceived to be a more complicated rental process at a company that began its meteoric rise with a new, easier way of searching for and finding entertainment effortlessly.

Netflix shares tumbled $41.34 to $77.50 in late morning trading Tuesday. The is down from more than $300 just 3 1/2 months ago. The last time the stock was trading so low was in April 2010, but that was during an extraordinarily steep ascent, after the company nearly erased the omnipresent blue and yellow storefronts of .

The revelations from Netflix prompted a downgrade to "Neutral" from "Buy" from Citi Investment Mark Mahaney on Tuesday, who also slashed his target price on the stock to $95 from $220. The analyst called the price increase and the abandoned plan to separate Netflix's DVD business two "major execution errors."

Netflix Inc. did report better-than-expected financial results for the third quarter, but that was drowned out by the din of subscriber cancellations, expense controls and a one-time tax benefit, said Wedbush analyst Michael Pachter.

Pachter cut his target price to $82.50 from $110 on Netflix's stock and kept his rating at "Neutral."

Los Gatos, Calif.-based said it does not comment on stock movement or analyst reports.

Explore further: EU Parliament votes to break up Google

5 /5 (1 vote)
add to favorites email to friend print save as pdf

Related Stories

Netflix lowers subscriber forecast, shares fall

Sep 15, 2011

(AP) -- Netflix Inc. lowered its expectations for U.S. subscribers for the third quarter by 4 percent on Thursday, just weeks after separating its DVD and streaming services, which increased the price for customers who want ...

Netflix to provide service to the UK, Ireland

Oct 24, 2011

Netflix Inc. plans to offer its online subscription service to the United Kingdom and Ireland starting early next year, providing access to movies and television shows.

Questions and answers about Netflix's flip-flops

Oct 10, 2011

(AP) -- Puzzled by Netflix Inc.'s recent changes? You're not alone. Here are basic questions and answers about the company's reversal of its decision to split off its DVD-by-mail service and rename it "Qwikster." ...

Netflix apologizes for snafu, renames DVD unit

Sep 19, 2011

Netflix's top executive acknowledged that he "messed up" the video giant's new pricing scheme and announced a rebranding of the DVD rental service which has been split from its online streaming unit.

Netflix to stream movies, shows in Latin America

Jul 05, 2011

(AP) -- Netflix is expanding its movie and TV show streaming service into 43 countries throughout Latin America in the online movie rental company's largest international expansion yet.

Recommended for you

EU Parliament votes to break up Google

Nov 27, 2014

The European Parliament voted overwhelmingly for the break-up of Google Thursday in a largely symbolic vote that nevertheless cast another blow in the four-year standoff between Brussels and the US Internet ...

Toyota finds new air bag issue, recalls more cars

Nov 27, 2014

Toyota Motor Corp. recalled more than 40,000 vehicles in Japan on Thursday as part of a worldwide scare over defective air bags and is investigating a new type of air bag problem that could lead to further recalls.

Netflix sues Yahoo CIO for alleged kickbacks

Nov 26, 2014

Netflix is suing a former company vice president who is now chief information officer at Yahoo, accusing him of receiving money from vendors he hired to work with the video streaming company.

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.