Agree with BA. These were the points I made this weekend (specifically the Starz deal). The discussion I had last night with a guy centered on ‘how’ they did it. I don’t think anybody would disagree they had to increase pricing because of margin compression on streaming videos as deals reset and content providers prices go up. What I would have loved to hear is the discussion on how they decided to just say ‘our prices are going up to 16, here’s a link to cancel/modify’. I think they pi$$ed off a lot of people and will suffer for it. If they would have put a prettier bow on it, I think the hit would have been much more minimal and the cost to do it would have been basically zero…
jcole21 Wrote: ------------------------------------------------------- > What I would have loved to hear is the discussion > on how they decided to just say ‘our prices are > going up to 16, here’s a link to cancel/modify’. > I think they pi$$ed off a lot of people and will > suffer for it. If they would have put a prettier > bow on it, I think the hit would have been much > more minimal and the cost to do it would have been > basically zero… Exactly. How hard would it be to come up with a more personal email saying the same thing? and the reason they did it was…? Oh yeah, they gave none. Something that would have NOt pi$$ed people off could have gone something like: “In effort to stay competitive with Cable companies and try to bring you more titles to enhance your Netflix experience, we’ve decided to change our price structure. Our new prices allow you the ability to fully customize your entertainment experience more than before. Although the combined ‘watch instantly’ and ‘dvd’ subscriptions now cost more, we’re certain that the potential for more top titles will be worth it.” I mean…how hard was that? Whoever sent that email should be fired or seriously reprimanded. edit: spelling edit 2: spelling again…dammit!
Down another 20% today and more than 40% since the price change in July…damn…
I sold my puts today after this move. I’m thinking there is plenty of room to short it more but I’m afraid it will do what RIMM, my other short, did and move up a ton the next month before exploding again.
ManMythLegend Wrote: ------------------------------------------------------- > The company is finished. I’ve already heard from > a ton of folks who are going to cancel their > accounts come late Aug. Hi.
I messed up. I owe you an explanation. It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing. For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do. So here is what we are doing and why. Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies. I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service. So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently. It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming. Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated. There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready. For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you. I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly. Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions. Respectfully yours, -Reed Hastings, Co-Founder and CEO, Netflix p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments. http://blog.netflix.com/
I actually like their decision to split the two up. I also like their move into video games. What’s up GME?
ChickenTikka Wrote: ------------------------------------------------------- > I actually like their decision to split the two > up. I also like their move into video games. > > What’s up GME? Do you like it as a customer or like it as an investor? I would say the split highlights the weakness in their value proposition as it changes it from “bargain” status (ie: you can have DVD mail service and we’ll throw in streaming for FREE) to paying more for the value customers want. Netflix controls neither their content nor their distribution so they have little power when it comes down to the large-scale negotiation that is going on. Consumers want (and have gotten to this point) a bargain for X, content providers are saying hold on, we will give you X but you will have to pay much more. Netflix is stuck in the middle of this with little control over either and is getting squeezed out of something that was formerly very profitable and scale-able for them. Both customers and content providers can and will walk out if they don’t get what that they want. Basically NFLX was able to leverage their original multi-year Starz deal (which was a complete steal) for out-sized profits in the short run and that is proving to be unsustainable. The stock was not realistically priced for a stumble from the perfect growth scenario. It sounds kind of like the music industry showdown over streaming that Apple more or less solved and won out on. However unlike Netflix, Apple had tight control over the distribution (itunes/ipods/loyal customers) which may have made all the difference. Will make a good business school case study someday.
I think it will allow them to jack up the prices on the dvd service for people who actually really want it. I’m thinking of older people who like a lot of old movies who are more price elastic. Ultimately this has to happen at some point anyway, so I don’t disagree with it from a management perspective, although, I’m sure they could have handled it better. I still think the stock is a good short at its present valuation and with competition rapidly increasing.
Well if Reed hadn’t shot himself in the foot once, the guy manages to do it three times in a span of 3 months. No wonder the stock is in a wheelchair that is stuck looking at a 100ft high stairway with no handicap ramp shot 1: Increased prices (needed to) but in an abrupt and FU manner that just pissed off even the customers that didn’t cancel shot 2: Lost Starz content and had the BALLS to say it was no big deal shot 3: splitting the company into two with 2 SEPARATE log ins. Ok so our already sucky streaming content will suck even more in a few months because we lost the biggest content provider but for those poor souls who decided to stick with both of our services even after the unexplained (but justified) price increase will now have to remember two different log ins and have to go through the pain of going to separate websites to do it. Good job Reed. Your arrogance just fked you up dawg And the idiots think this is a GOOD move and the stock is up almost 5% today… PS: I have no exposure in NFLX but I wish I did. I shorted it when it hit 300 but covered way too early thinking Reed had a couple more tricks in his pocket to shoot the stock to 350 before its descent. Oh well…
Thanks Dwight - they did it better there, still not sure from an investment standpoint where it sits, but that was smart marketing.
ZeroBonus Wrote: ------------------------------------------------------- > No wonder the stock is in a wheelchair that is > stuck looking at a 100ft high stairway with no > handicap ramp Wow, that sounds bad!
Now if I could only trade on of the each unit individually…
Well seems like people are exiting the stock, the 5% pop in the morning might have been short covering of some sort. Close more than 7% in the red. Its a dead stock now.
ill tell u i wouldnt want to be long this stock going into the likely greece default and euro turmoil on restructioning …want to be long in the tech industry? …go for the apple, google, or amazon
pimpineasy Wrote: ------------------------------------------------------- > ill tell u i wouldnt want to be long this stock > going into the likely greece default and euro > turmoil on restructioning …want to > be long in the tech industry? …go for > the apple, google, or amazon long?? I would say this thing is a short till it hits 100 and even then should be shorted some more They killed the streaming business by losing Starz and now have decided to mess with the bread and butter (mail in DVD) by renaming it. Unless, if by doing this they are trying to go back to the mail in business and let streaming just die down for a while. Trying to replicate the cable companies’ business model at $8/month is impossible.