The End of the Netflix Honeymoon

by Matt Klassen on October 26, 2011

It looks like the honeymoon with Netflix is over, that period of googly-eyed infatuation, evidenced by a mass exodus of subscribers that has subsequently sent shares in the once popular streaming video service into a veritable nosedive.

Despite the fact that Netflix revolutionized the way people view video content, the company posted disastrous Q3 numbers, admitting that it lost over 800,000 subscribers during that quarter alone. Not only that, but it this trend continues the streaming video service will post its first quarterly revenue loss by the Q1 2012.

While this certainly will come as depressing news to any Netflix shareholders, with Wall Street abandoning the stock like rats from a sinking ship, with such struggles often times comes opportunity, as other established companies will now begin considering acquisition bids for the streaming video company.

There’s little question that consumers like Netflix as the streaming video service has almost single-handedly destroyed the traditional video rental market, driving many established players both north and south of the border out of business. Customers have been drawn to Netflix’s expansive library of titles, its easy to use streaming service, and most of all, its low monthly price.

But looking to capitalize on its success Netflix made one of several costly errors, it significantly increased its monthly rate and needless to say, it didn’t take long for the subsequent mass exodus to begin. Truthfully though, that wasn’t Netflix’s only misstep, as several high profile customer service mishaps plagued the company through this past quarter as well.

All of that paled in comparison though to what happened when the company finally acknowledged its recent struggles in its latest quarterly report. Although the company had seen its stock steadily decline, it was in utter freefall following the report that the company had lost 810,000 subscribers and forecast a loss in revenue by Q1 of next year.

As of yesterday, Netflix shares were trading at just $77.16, down a staggering 35 percent from Monday’s closing price of $118.84. All told, the company’s stock price has fallen nearly 73 percent of the past three months.

The news comes as Netflix is in the midst of rolling out its European expansion plan–curently in the UK and Ireland– although the company has said that it will postpone any more expansion until after it has sorted out its financial future.

So what does this mean for the streaming video service? For one it means that potential suitors are contemplating acquisition offers, meaning potentially that we could see renewed interest from Amazon or any number of new comers looking for a solid foothold in the streaming video market.

Of course, depending on the success of its European expansion, this loss of subscribers could very well simply be an equalization process as Netflix continues to find its true subscriber base.

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Written by: Matt Klassen. Follow by: RSS, Twitter, Facebook, or YouTube.

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Netflix's Usage Numbers Hit Milestone —
August 21, 2012 at 5:47 am

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