If one’s relationship with Facebook required a status, it would probably be “complicated” for most. Like with Netflix and its chief executive Reed Hastings, who could face a civil action over a status update that allegedly violated disclosure rules. Oh, and also for this girl… Read more
Netflix Regained its footing with subscribers in the fourth quarter, reversing some of the losses it suffered after it enraged customers last summer with a price increase and plans to separate its DVD-rental business, reports the WSJ. The online video company said Wednesday it added 610,000 US subscribers in the period to end the year with 24.4m domestic members. That’s still below the 24.59 million it had in last year’s the second quarter, before it raised the price of a popular plan by 60 per cent and announced a plan, since abandoned, to separate its DVD-rental business into a separate unit. Netflix said revenue jumped 47 per cent to $876m in the quarter, but its profit slid 13 per cent as the company spent money to expand internationally. Netflix’s recent launch in the UK “greatly exceeded expectations”, the FT reports.
We ‘fess — apart from when we’re enjoying our Friday Night Lights addiction, we haven’t been paying much attention to the rise and rise and rise and now fall of Netflix. But this is pretty spectacular:
Netflix shares slumped more than 25 per cent in after-hours trading on Monday after the company revealed that subscriber numbers had fallen by more than expected and warned that its UK launch would push it into the red, the FT reports. Shares in the online streaming and DVD subscription group have tumbled in the last three months after a series of gaffes, including a sharp price increase and an ill-judged re-branding exercise, sparked an exodus of customers. Netflix shares touched $300 in July but at the market close on Monday they were $118. As investors digested the third-quarter earnings the shares fell as low as $87 in after hours trading. In a letter to investors, a contrite Reed Hastings, chief executive, said that many of the company’s “long-term members felt shocked” after the company increased prices by about 60 per cent, adding “more of them have expressed that by cancelling Netflix than we expected”. Reuters reports the company also said that in 2012, content spending will “nearly double” from this year, and it forecast a loss for the first quarter of 2012 as it expands into Europe.
Netflix has buckled under pressure from investors and customers to make one of the most high profile US corporate strategic u-turns in recent years, backing off from a controversial plan to split its mail-order DVD and its online streaming media businesses, the FT reports. The move is the latest twist in four months of dramatic announcements and corporate restructuring from the company, during which customers and commentators have pilloried Netflix chief executive Reed Hastings over the changes. Richard Greenfield, analyst at BTIG, called the move a “necessary reversal of a bad decision”. Shares in Netflix had fallen 60 per cent since July, as investors and analysts reassessed the company’s long-term prospects. Netflix traded up modestly in midday trading, but the finished the day down 4.8 per cent to $111.62. “They’ve completely alienated their customers at a time when there are strong new threats,” said Shahid Khan, a consultant with MediaMorph. “I don’t think their stock is ever going to recover.”
Netflix, the DVD and online video subscription service, will this week unveil a new streaming deal with DreamWorks Animation, the FT reports, citing people familiar with the situation. The deal could be announced as early as Monday. DreamWorks Animation, the company behind the Shrek films, is under contract with HBO, the Time Warner-owned cable channel, until the end of 2013 but has struck an agreement with Netflix that will allow the company’s streaming service to show some of its films before that time. Netflix will replace HBO as the company’s output partner when the HBO deal expires. Netflix is keen to bolster its content library before February, when its contract ends with Starz. It is aggressively pursuing other licensing agreements and is also in discussion with Warner Brothers about putting its television programming on the streaming service, the report says.
Netflix will split its DVD-rental and movie-streaming arms, its chief executive has said, in a blog post apologising for the company’s stock price collapse in recent days. Reed Hasting said that separation of the DVD business into a new service, “Qwikster”, had been the reason for a controversial price increase for customers, the WSJ reports. The move might allow Netflix to clean up its profit-and-loss statements, and give analysts a clearer way to value the company, but Qwikster’s creation also signals that the DVD-by-email business has reached a dead end, argues GigaOM.
Netflix shares have tumbled more than 10 per cent in after-market trading, following the company’s warning that a price rise will cause some customers to downgrade or cancel subscriptions, the FT says. Earnings per share of $1.26 in Netflix’s second-quarter results were above analysts’ estimates, but they took fright at the guidance for Q3 including projected subscriptions growth of 27 million, All Things D reports. The increase effectively hiked prices for some customers by sixty per cent, and will also raise the pressure on Netflix to strike new and better contracts with content providers, the NYT says.
Netflix, the US film and television subscription service, is working on a push into Latin America and is close to announcing deals with three of the continent’s biggest broadcasters to begin streaming programming online in Argentina, Brazil, Chile and Mexico, reports the FT. The California-based group is negotiating to acquire telenovelas and other content from Grupo Televisa and TV Azteca of Mexico, and Globo of Brazil, say people familiar with the plans. Netflix declined to comment, although it told the FT it had significant international ambitions. Netflix has almost 24m subscribers in North America, including about 800,000 in Canada – up from about 15m a year ago. Reed Hastings, its chief executive – and a Microsoft board member – told Bloomberg TV last week that Netflix was on a 70% growth curve.
Amazon is developing a film streaming service that would compete directly with Netflix, the FT says. The company is planning to bundle access to the service with Amazon Prime, a premium service that guarantees customers unlimited free shipping of books and other items sold by the online retailer after paying an initial fee. Engadget released a purported screenshot of the leaked service recently. A source confirmed that Amazon was working on a streaming service. However, Amazon faces an uphill struggle if it is to overhaul Netflix in subscription video. Netflix shares have risen almost fourfold in the past 12 months as the company has built a dominant position in online film viewing beyond DVD subscriptions.