Netflix's third quarter 2011 financial results are out and even though the streaming movie and TV show service warned investors it would show a loss in subscribers for the period, the final numbers were below expectations. The company announced that it lost 810,000 total subscribers in the three month period that ended September 30. That has caused Netflix's stock price to plunge down over 26 percent in after hours trading.
These results show the huge mistakes that Netflix caused for itself earlier this year when it announced a 60 percent price hike for people who wanted to get both the streaming video service and its mail order DVD service. You have to wonder why Netflix decided to make such a sudden move, especially since up until that time it had the confidence of its customer base.
The big problem with Netflix management isn't that it raised prices. It's that the company still feels that it was a good move and won't change its mind. In its third quarter financial results letter today, Netflix said that less than half of its streaming customers also choose to sign up for the mail order DVD business. The company seems to believe that it should concentrate its efforts on the streaming business.
This seems a bit short sighted. Yes, the mail order DVD business will eventually disappear but at the moment it still offers customers a way to get movies and TV shows that are not available on the streaming service. Despite what Netflix might think, many believe that the company should restore some kind of hybrid plan that offers a lower price if customers get both services. It certainly would be a way to win subscribers back in the long run.