Netflix Stock Plunges as Subscribers Flee
The company says it lost more than 800,000 subscribers in the past three months.
| Posted Tuesday, Oct. 25, 2011, at 10:32 AM
Photo by Hector Vivas/Latin Content/Getty Images.
UPDATE: Netflix took a beating on Wall Street on Tuesday morning, with the video-rental service's stock plunging by more than a third after the company unveiled its quarterly earnings report the night before.
The big number in the third-quarter report was 800,000, which is roughly the amount of subscribers that Netflix lost on the heels of its unpopular decision to raise prices and its now-nixed plan to spin off its DVD-by-mail service into a separate company.
As CNET points out, the loss is quite the reversal for a company that had managed to add at least 1 million new subscribers in each of the previous seven consecutive quarters. The company reported it had 23.8 million subscribers at the end of September, down from 24.6 million three months earlier.
The Wall Street Journal notes that Tuesday's stock plunge has shares trading around $75 for the first time in 18 months and "continues a dramatic tumble that has erased about $12 billion from the company's market value in just 104 days."
The paper adds, however, that despite the subscriber losses, the company's profits and revenues were actually up. Still, Netflix gave its investors even more to worry about it when it said that it expects to start losing money for a few quarters beginning in early 2012 because of costs associated with an expansion in Great Britain.
POST Monday, Oct. 10: Netflix announced on Monday that it is abandoning its plan to split into two separate businesses, a move that will keep its DVD-by-mail and online streaming services together under one name.
The company, however, said that the price hikes it announced this summer—which incited widespread anger among its subscribers and caused an estimated 1 million to cancel their subscriptions—will remain in place.
"It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs," the company’s CEO, Reed Hastings, said in a blog post. "This means no change: one website, one account, one password … in other words, no Qwikster."
Under the now-abandoned plan that was announced in August, subscribers wanting to keep both services would have needed two separate subscriptions: one to Netflix, the video-streaming service; and one to Qwikster, the DVD-by-mail company.
"Consumers value the simplicity Netflix has always offered and we respect that," Hastings said in a statement to the New York Times. "There is a difference between moving quickly—which Netflix has done very well for years—and moving too fast, which is what we did in this case."
