Netflix Makes a Mistake

December 16th, 2011

DiscIt’s a common belief: if you raise prices then income will also increase. But this isn’t always true. Earlier this year, Netflix, the DVD and streaming movie provider known for it’s affordable prices, made some changes to its pricing structure. They lost 800,000 customers as a result. Their stock price plunged, and they may be in the red for most of the next year.


2 Responses to “Netflix Makes a Mistake”

  1. [link]Eric Says:

    That’s a weird article.
    Firstly, it’s very easy to lose customers and become MORE profitable — if you do something that gets rid of your least profitable customers. Ex: Raise the prices and the constant complainers who make the most customer service issues quit and it’s a win-win for the company. Or get rid of the people who it costs too much to fulfill their purchase (it’s probably a LOT cheaper to stream someone a video file than to stock, sort, pick, and ship a dvd to someone).
    Second, writing a “financial” article that blabs about them losing 800,000 customers to get people like my mom to ditch the stock and thus lower the stock price doesn’t change the profitability of the company — it just messes with the stock price in an artificial way. So smart people can buy the stock cheap off people like my mom.

    I don’t know anything else about their situation so I don’t know about them “being in the red”. All I know is what was stated in the article and that said “Netflix Inc. did report better-than-expected financial results for the third quarter”.
    Expecting DVD business to die off because everyone is streaming video seems pretty sensible to me. Kinda like the next advance of the same type of thinking they used to crush Blockbuster.
    In fact, it’s probably a good time for Netflix to buy back a bunch of it’s shares from people like my mom so that when Netflix shows a greater profit with 800,000 fewer customers they can then sell the same stock shares they just bought from people like my mom back to people like my mom and make money on the stock transaction as well.

  2. [link]Chad Cloman Says:

    The “in the red” part comes from a different article, although the source article for it’s statement appears to have gone away.

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