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Netflix Says One Million Customers Expected To Depart After Price Hike

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Netflix (NSDQ: NFLX) users are voting with their feet: the company said Thursday that it expects to lose 1 million customers this quarter after it raised prices for customers who wanted access to both DVDs and online content.

The upside is that Netflix said its financial projections for the quarter will not be affected by the drop-off in customers, but it’s obviously not a great piece of news to have to announce. Around 80 percent of the now-departed customers were DVD-only subscribers, while Netflix said that the number of subscribers who pay for access to both DVDs and streamed content will remain unchanged.

Netflix used to offer a subscription plan that offered a discount on the total price of its DVD service and its streaming video service, but announced in July that as of September 1st, customers would have to pay full price for both services: a 60 percent increase in the cost of both DVDs and streaming.

“We know our decision to split our services has upset many of our subscribers, which we don’t take lightly, but we believe this split will help us make our services better for subscribers and shareholders for years to come,” Netflix said in a statement (click for PDF) posted on its investor-relations Web site. But investors were not pleased, and sent the company’s stock down 15 percent in midday trading.

18 Responses to “Netflix Says One Million Customers Expected To Depart After Price Hike”

  1. What about the number of subscription downgrades? They are projecting a loss of 800K for those who take only DVDs, but they don’t say what the number of checked-out DVDs are for the remaining subscribers (for DVD-only and both). The anecdotal evidence I see and hear is that there is a lot of downgrading going on as far as checked-out DVDs (I’m one, for example, going from 3 to 2).

    If I were an investor with substantial holdings in Netflix, I’d be worried about that missing nugget of information. Netflix needs to report on the metric of checked-out DVDs for all DVD subscribers. If I were on a call with them, I’d bring that up, and wait for the awkward silence and sputtering.

    As the withdrawal of the Starz portfolio becomes more up-front, watch the streaming losses go from 200K to something much higher.

    My prediction – by first quarter, with Netflix stock down even much more, and subscribers flocking away in droves from the necessary price increase for streaming to cover the cost of getting the Starz portfolio to stay put, you’ll see a lot of “please come back! We’ll restore your original subscription prices from when you signed up!” e-mails. But after being treated like crap by the executives of Netflix, those pleas will fall on a lot of empty ears.

  2. I cannot believe they priced it so low when they offered the combined DVD and streaming.  I think that person(s) are probably fired.  Now they turn around and over price.  Bad management.  There could have been a happy medium or better packages offered..

  3. I didn’t like the price hikes because of the size of the hikes, so I cut back on number of DVDs out at a time, but moved up to Blu-Ray.  I don’t like Netflix losing Starz!, and think Starz! will be going to Amazon/Hulu Plus, but their software isn’t too internet TV friendly, has commercials, and some of their customer service could be better.  Are we going to have to rate every content provider for their content service like Amazon?  LOL.

  4. Besides the price hike, I also heard that they no longer carry any content from Sony so there selection of both DVD and streaming has been drastically reduced.
    Pay more…get less. Doesn’t sound like such a great deal.

  5. Matt Sipes

    At the end of the day if you raise prices without any additional incentive for those reasons, you will lose customers.  Netflix’s online content selection is pathetic and now Starz is pulling out.  They are dead in the water if they don’t get good content online.

  6. I dropped the DVD service and now only get the streaming. There is so much on the streaming that I had not watched a DVD in 6 months. The price change just motivated me to drop the DVD’s, something I should have done months ago.

  7. their prices are completely fair and worth the money for content provided.  Losing customers that do not pay enough to cover costs is a good thing for the long term health of the company.  Netflix would go out of business if it tried to give people services that weren’t paid for adequately by subscription fees.

  8. Beyond Fed UP

    Unless the video distribution and cable companies come to their senses and figure out that most consumers want A la carte services with more choices, their business will continue to decline.

    Many, many people are canceling their cable and video rental subscriptions initially for economic reasons but then on a permanent basis when they determine they aren’t quite as addicted to watching television and movies as previously thought. Many actually acquire lives.

    • You raise an important point.  A lot of the anecdotal feedback I’ve seen has been along these lines; i.e., “I don’t mind paying more for a better product, but the product is not getting better.”  Expanding streaming agreements is not cheap, but lagging in new content costs Netflix even more.  With Amazon continuing to grow its streaming options, NFLX had better keep improving.