Major Netflix Announcements!

What an evening! Here's a quick rundown of what's going on:

1. Netflix is lowering the price of the 3-out subscription plan to $17.99 per month, starting in November.
2. Amazon is entering the DVD rental maket, according to Netflix.
3. Netflix announces GAAP Net Income of $18.9 million for Q3 2004, based on revenue of $141.6 million for the quarter.
4. Netflix has postponed European expansion plans to focus on the increasing U.S. competition.
5. The churn rate remained constant at 5.6% since last quarter.
6. The stock dropped from $17.43 per share to $10.99 in after-hours trading tonight.
7. Netflix is expecting to break even over the next year instead of being profitable.

Netflix to preparing for war due to the threat of competing with Amazon (Hastings said that Blockbuster was never considered as a threat). This market is getting increasingly crowded with Netflix, Blockbuster, Walmart, Greencine, and several other companies renting DVD's online. Then there is the additional threat from video-on-demand and the new movie download services.

I expect this to be an interesting year...

Here's a bit of the press coverage of the story:

Netflix Press Release

Forbes: Netflix Third-Quarter Profit Rises

CNN/Money: Netflix takes hit on reduced outlook

CBS MarketWatch: Netflix Proves Its Critics Right

buzzhit! Amazon to do online movie rentals; Netflix stock plummets

MercuryNews.com: Netflix Stock Drops on Anticipation of Amazon Competition

Thanks to Nick, Tony & Jeff for contributing to this story.

Comments

[Tony Gentile]

Mike, appreciate the link and attribution; quite kind.

Unfortunately, it's a story I wish I didn't have to write about (I'm sure you share that sentiment).

I didn't listen in on the analyst call, so your added comment of "Hastings said that Blockbuster was never considered as a threat" is news to me.

And quite frankly, it's shocking.

Reed's a very bright guy, with a strong team behind him... so perhaps I'm missing something. But I've been beating the "Netflix has no competitive advantage" drum for a couple of months now, and for him not to acknowledge that Blockbuster, with a more established brand, better capitalization, larger customer base, and most importantly, an impulse rental satisfying physical store (i.e., channel) presence... shows either arrogance or ignorance. (And believe me, I have no motive to ascribe such words to Reed, just calling it as I see it.)

Netflix should be on the phone tomorrow with MSFT and Apple to see if either is interested in an acqusition, partnership or OEM offering. Tivo is not the answer.

[Mike]

Looks like Netflix is learning its lesson due to its price hike. Look at how many customers they probably lost that would of stayed. Now they need to also lower the price on their other rental plans to.

[Bob]

Netflix needs to do something, if they don't resolve their shipping issues I am heading over to Cockbuster....

[Jeff]

What shipping issues? And I've tried blockbuster online, and their selection sucks. And their shipping time was nowhere as good as netflix's [even though they had a distrubiution center close [but not as close as netflix's].

[josh]

hey my account still is showing the higher price for the 3-out program - anyone know the details on that. is it only for new customers???

[Manda]

If Amazon's service uses their current mailing centers, I'll definitely switch. There are two of them within a day of me, one much closer than Netflix's.

I wonder if the other subscription plans will get a reduction in price as well. What I'd really like to see is the return of the 4-out plan. I'm on Walmart's 4-out at the moment, and it seems like the perfect number for me. But I'm not about to pay $30+ for 5-out at Netflix. I'm about fed up with Walmart's limited selection, though, and should be really craving Netflix again by the time the new pricing kicks in.

[Michelle]

I'm pretty happy the price will go down, even though I did not have a problem paying the higher price. I'm saving a ton of money not going to the movies, and buying the TV Shows on DVD I want. I've only had a few problems with Netflix, but not enough to make me want to leave or try another service. I'm very pleased with Netflix.

BTW the new price goes into effect in November, so for folks complaining they were charged the higher price, the new price starts November 1. If you are charged the higher price in November, that's when you should complain.

[Tony]

I know you mentioned the price reduction but I just sent a note over to NetFlix and this is the response I got. Are they just messed up?

See below:
___________________________________________________
Hi Tony,

Thanks for your message.

Our prices have not changed. We apologize for any confusion.

If you have any further questions or concerns, please feel free to contact us.

Thanks,
Marissa,
Netflix Customer Service .

> -----Original Message-----
> Sent: Friday, October 15, 2004 8:18:33 AM
> To: cs_mail@netflix.com
>
>
> Subject: Pricing Question
>
> I've read a number of places about the pricing for NetFlix being reduced
> to $17.99. Can you tell me when this is going into effect and if this is
> in fact true? I realize I was grandfathered into the 4-disk a month deal
> because of being a charter member but I was always under the impression
> we'd be treated as a 3-disk a month customer as far as pricing was
> concerned.
>
> Thanks - Tony
>

[tdl]

well marissa with Netflix customer service is lying and possbily commiting a fraud. As of 1 pm easter the netflix site is offering new custemers 3 out at a time NO limit for $15.99!

[Chris]

I also emailed Netflix, waiting for a response. I havent been very happy with there Tech Support lately. I tried calling them 2 weeks ago about a shipping issue, and I was on hold for 10 minutes, so I hung up. I had it sorted out thru emails, which is ok I guess.

As for the price change, I just tried to cancel my account and a page came up to offer me the same 3-out plan for $17.99 (versus $21.99). The catch is you are obligated to stay with them for the next (6) months, or you will be charged the difference in the full price.

My question is, my next billing date is on the 19th. If I take advantage of this offer, will the "regular price" be the new price they come out with next month?

Last thing, I was upset when the raised the prices a year or so ago, since it only makes sense to lower prices when you get more customers (Walmart does this). I never did any research, but what was their reason for raising prices? I tried emailing them, but never recieved a valid response. If anyone has, please post it.

This WILL come back to bite them in the a$$.

[tld]

chris Wrong it is $15.99 and the obligation is only three months
"FREE TRIAL
New customers are eligible for a free trial. To avoid being charged after your trial, simply cancel your account before the trial ends. If you are enjoying Netflix, do nothing and your membership will automatically continue for as long as you choose to remain a member at the 3 -at-a-time program rate, currently, $15.99 plus any applicable tax. See Terms of Use for complete membership details."

several screen shots of this are up on the web, and if if you flush your cookes and cache it says $15.99, three month obligation. I just canceleed and signed up in my wifes name. $15.99 a month, that is a 33% price drop and really an outrage that the reply notes are telling current customers there is no such thing.

[Mikek]

Hey! Slow down... They only announced the change last night! Give them a day to get their act together.

I confirmed the price change (effective Nov 1st) with Netflix and more info will be available soon.

Patience... - Mike

[Rocket Punch]

Wrote many many emails to Netflix about jacking their prices without added service; They don't care. Telling them there is a big market for online video game rentals and a lot of us will buy into that; They don't listen.

I switched to blockbuster for cheaper price, good selection (I rent a lot of foreign and anime films) + I got 2 in store free coupon every month.

Whoever is sitting on that marketing chair is STUPID, and a 17 year old kid will have better marketing sense than that guy.

Netflix, here is my last suggestion for you. All you do is to follow my plan and I can guarantee you will win this war.
1) Add video game service as a separate service or as a bundle to movie rental service.
2) Add an option for people to buy movies and video games.
3) Add an adult section controlled by a special added code, where you have to put in every visit.
4) Promotion, newsletter with coupons. etc (do I have to think of everything??)
5) Add online Music rental, yeah actual CD. (Why no one ever thought of that?? that's is beyond me.)
6) Why stop here?? Add online mp3 music service, bundle it with game and movies.
7) Hire me.

[flixer]

Folks,
Sorry for any the confusion. Hopefully this will provide some clarity:

1) The price change is effective November 1 for all Members. Your credit card billings in November will reflect the new lower price.
2) Regarding Customer Support, we had a few temps who were off yesterday and not aware of the price change. They are now, and our apologies for that (Tony, you should be getting a follow up from our CS manager soon).

Thanks for your support, and we hope you continue to enjoy Netflix for a long time to come!

[Some]

Netflix should get some hard core porn.

[Manda]

The $15.99 offer is just for inticing new members. I finally got $15.99 to show up on the front page (after deleting cookies and trying again and again), but since I only cancelled a month ago, the system recognized my e-mail addy and offered me $21.99 instead. Maybe former Netflix subscribers who have been away longer than me will have better luck. I'll just wait until the 1st before re-joining.

[will]

manda,

business with montly fees always attempt to entice new members with the lower prices. loyal established cusotmers always pay more unless they push. that is why mobile phone companies fought the number portablity so hard. from your end though there is nothing unethical about pressing to get the same deal.

one minute to set up a new hotmail account isn't much of a hurdle.

[Manda]

> one minute to set up a new hotmail account isn't much of a hurdle.

True but it would take more than one minute to re-input all of my 200+ item queue, and that's worth more to me than saving $2. Plus, it's just as likely that they'd recognize my (only) credit card number anyway.

[Some]

I was a Netflix member way back when they first got going. (quit because of horrible shipment time)

I heard they had a new shipping center in my area so I signed up again. I tried with the free trial at the time and it wouldn't let me because of my credit card number.

Luckily, I have two credit cards.

[will]

manda,
I use the same credit card for accounts for my dad and sister. netflix obviously doesn't flag by credit card.
It isn't a two dollar savings anyway, it is way more than that over time. the $18 deal ont he site shows a limit of ten films per month, the $16 deal shows no limit!?

don't forget you get speedier service each tim you cancel and renew you account (slashdot documented this with controlled tests).

Perhaps that is a shame, but companies which give better deals and service to their new customers can't complain when loyal long term customers cancel and restart to get the deal others are getting.