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Is Netflix Doomed?

post #1 of 103
Thread Starter 
By Brett Arends, MarketWatch
As recently as July 25, the company was expecting to have 25 million customers by the end of this month. Now it expects 24 million. That will actually be about 600,000 fewer than it had in June.

Netflix stock crashed last week to just $155. As recently as July it had hit $299.

Late Sunday, CEO Reed Hastings, while unveiling a more formal separation of streaming from DVD-by-mail subscriptions, issued an apology and explanation to Netflix's disgruntled clientele

But Netflix's biggest problem isn't a simple management error. It's the marketplace.

Netflix prospered in a pre-streaming world. It bought DVDs and then rented them out, over and over again. It was a genius at fulfillment getting the films back, and sending out new ones, quickly and easily. And it was, after its earliest days, the only player in town.

No longer.

The future lies in streaming. In this era, Netflix's core strengths the DVD library and its logistics are irrelevant. And it's up against massive companies, including the likes of Apple and Amazon and the TV and movie studios. Every home finds itself in the same situation as ours. You have tons of options for getting movies and TV over the Internet or on TV.

Where is the competitive advantage? Where is the moat around the business?

Even before last week, Netflix's stock had been pounded after talks with Starz Entertainment broke down Sept. 1. Starz supplied Netflix with movies from the likes of Disney /quotes/zigman/245568/quotes/nls/dis DIS -1.98% . The breakdown in talks shows very clearly where power now resides: with those who control the content.

I wish Netflix luck competition is good for consumers but I wouldn't own this stock. It's still trading at 26 times forecast earnings assuming those forecasts don't come down and three times sales. The company is valued at $330 per subscriber. In a free and competitive market, this should be a narrow-margin industry. Any profits ought to accrue to someone who makes a hit program.
post #2 of 103
Netflix is still at the forefront in terms of numbers of homes with compatible players. That said, they are moving into ever harder territory.

With discs mailings they had a number of traditional laws and business agreements in place to help them prosper as long as they took care of the customer. With streaming there is little established law/precedent to keep the studios from punishing Netflix for its success.

And let's be honest, the studios will always punish its business partners if the partners happen to figure out a way to be successful with their content.

-Suntan
post #3 of 103
When I discontinued my membership last week, a two blu-ray at a time plus streaming plan, I was greatly surprised that Netflix seemed not to care in any way. I expected a survey form to have been e-mailed to provide feedback about how terrible the play back quality of their steamed video had been. I was at the point of using shipped blu-rays almost exclusively because of that. Extemely poor data gathering on reasons for a discontinued membership!
post #4 of 103
I received an "Apology/Explanation" email from the CEO, (a prepared open letter), this morning...
I really hope they continue to succeed...However, I dropped my one disc per month and kept the "Streaming Only" option. I rarely watch the discs, when I purchase, it is something that I want for my collection.
I would rather they upped the streaming capabilities, (newer, popular movies) over the ability to rent dvd's and blu ray...
I understand, though, that the studios are at war with companies such as this...and, in the end, the customer gets shafted. Piracy will continue, as a direct result.
If people really had seen that they have been getting a smoking deal for a number of years,and the company could not continue in that fashion...ah well
post #5 of 103
At least the DVD/BR rental portion of Netflix is dead. It's now Qwikster.
http://www.engadget.com/2011/09/19/e...ut-dvd-succes/
post #6 of 103
Qwikster is a horrible name. It makes me think of Napster. They would have been better off with something like Qwikflix. I have no idea why they would have chosen Qwikster. Horrible.
post #7 of 103
Quote:
Originally Posted by StardogChampion View Post
Qwikster is a horrible name. It makes me think of Napster. They would have been better off with something like Qwikflix. I have no idea why they would have chosen Qwikster. Horrible.

completely agree. Qwikster, Quickster, Kwikset, Quickstar, Flixter, Clickster, Napster, Jamster, etc

How is a potential customer going to remember that?
post #8 of 103
Quote:
Originally Posted by carefreepastor View Post
When I discontinued my membership last week, a two blu-ray at a time plus streaming plan, I was greatly surprised that Netflix seemed not to care in any way.
Last week, you were just changing your plan, nobody was losing a customer.

Quote:
I expected a survey form to have been e-mailed to provide feedback about how terrible the play back quality of their steamed video had been.
I find these comments interesting, I wonder if a lot of folks here have worse internet performance than they think. Reason I say that is I'm on a "mere" 7Mbps DSL line, and the HD, even high quality SD streams, I find to be of surprisingly good quality. Certainly on par with the HD I get from Dish. I do have toubles, but those I chalk up to my internet connection, I know my provider was getting hammered for a while, but they upgraded or tweaked something that mostly resolved that issue.

Then again, I don't watch netflix on a PC.
post #9 of 103
Although streaming may be the future, Netflix has not exactly been winning the content contracts necessary to keep getting my money. Adding complexity to the system by splitting the services to two web sites and two companies makes me question if my money wouldn't be better spent elsewhere. I don't mind paying more money for streaming, but you better give me an improved product. The loss of Starz makes me think the product will not improve.
post #10 of 103
Problem is (other than Amazon) nobody has a subscription streaming service do they?
post #11 of 103
Not to be an apologist, but I think eventually people are going to return to Netflix once they realize how expensive it is to stream all the shows and movies they want to watch. Certainly, the all you can eat buffet style of streaming isn't for everybody, but for those that do like watching lots of TV shows, foreign films, classic movies, etc....there really is no alternative remotely comparable in pricing.
post #12 of 103
No matter the provider, they will have to pay what the Studios want or there won't be a stream .. matters not if NF / Amazon ..

Amazon is simply subsidizing streaming now as NF did for around 3 years .. and the time will come that it becomes a pay service .. once enough folks are sucked in ..

NF / QS or whatever you want to call it is by far the largest provider .. no one else even comes close in customers or revenue ..
post #13 of 103
Quote:
Originally Posted by mcturkey View Post

I don't mind paying more money for streaming, but you better give me an improved product.

Kind of my thoughts. Back int he day I remember thinking I would be fine paying $20 a month for a disc at a time plus streaming. Assuming the stellar customer service stayed the same.

Now I'm just getting the price increase with poorer customer service.

-Suntan
post #14 of 103
Quote:
Originally Posted by ZenerDiode View Post

Not to be an apologist, but I think eventually people are going to return to Netflix once they realize how expensive it is to stream all the shows and movies they want to watch.

Funny. The cable/sat guys said something similar to me when I dropped them. That was 12 years ago...

-Suntan
post #15 of 103
Quote:
Originally Posted by stanger89 View Post

Problem is (other than Amazon) nobody has a subscription streaming service do they?

Makes me wonder what kind of limitations the content providers are putting on their content. You can stream brand new movies right now (e.g. Vudu, blockbuster), but they stream as a "rental" model (access for a couple days). The subscription services (all you can eat) don't seem to have the brand new, or even many relatively new movies.

I think we'll eventually end up seeing a tiered subscription service. Base tier for certain (old, cheap, obscure) content, medium tier for new-ish content, and a premium tier for brand new content. Remember the days of renting VHS movies at blockbuster when you paid $1 for an old movie, and $4 for a new release?
post #16 of 103
Quote:
Originally Posted by StardogChampion View Post

Qwikster is a horrible name. It makes me think of Napster. They would have been better off with something like Qwikflix. I have no idea why they would have chosen Qwikster. Horrible.


They spent years getting the brand recognition with the Netflix name and will now have to start over with this awful Qwikster? It makes me think of a gas station honestly. It is pretty obvious they want to get out of the DVD business altogether.

I never understood why content providers want to make it more difficult for people to see their stuff. Content providers should stick with making content and let people like Netflix worry about getting it distributed. Personally I don't want "tons" of ways to get programming, if I can have an easy to use interface to watch what I want, when I want, that just works.
post #17 of 103
Quote:
Originally Posted by Suntan View Post

Funny. The cable/sat guys said something similar to me when I dropped them. That was 12 years ago...

-Suntan

And it's likely true if you're looking for what cable/sat offers.

Looking for HD Monday Night Football, NBA Playoffs, EPL matches, etc? Wanna watch True Blood, Mad Men, Breaking Bad the night it airs for the first time cause you can't wait? Like being up to date on Food Truck Race?

I'm guessing obviously you don't care for what I listed, but for those that do, the cable/sat guy is right. There is no cheaper LEGAL alternative.

Back to what I said about Netflix...for people that want to stream their large collection of TV shows, foreign movies, and classic movies, there is no cheaper legal alternative.

My bet (and it's just a hunch after all) is that there are more people who like to stream their collection just like there are more people that like ESPN, than there are people that don't. And people will find there is no cheaper alternative.
post #18 of 103
Quote:
Originally Posted by security6 View Post

Makes me wonder what kind of limitations the content providers are putting on their content.

That's easy .. it's called CASH ..

As I've said many, many times .. the only limitation is the willingness to pay for the content .. and, at least IMO, the studios think it's worth much more than it is ..
post #19 of 103
Quote:
Originally Posted by ZenerDiode View Post

Back to what I said about Netflix...for people that want to stream their large collection of TV shows, foreign movies, and classic movies, there is no cheaper legal alternative.

Yeah. If you're quitting a unique service and still expecting to get the same service, you're going to be disappointed (as evidenced by the random comments from cable-cutters that are mad that they don't have all their cable channels pumping out 10+ hours a day.)

However, if you find the service you are provided is no longer worth the cost, it isn't that hard to walk away. There are other things to do in a day instead of streaming stuff on the TV.

-Suntan
post #20 of 103
Quote:
Originally Posted by Suntan View Post

However, if you find the service you are provided is no longer worth the cost, it isn't that hard to walk away. There are other things to do in a day instead of streaming stuff on the TV.

-Suntan

That I whole heartedly agree with. I think the biggest threat to Netflix is the local parks, bars, and bistros!

I too am a cable cutter and enjoy MNF at my local sportsbar. Cons...beer is costing me way more than cable. Pros...beer!
post #21 of 103
And the alternatives are...?
post #22 of 103
Quote:
Originally Posted by MrBobb View Post

And the alternatives are...?

Alternatives that completely and directly replace NEtflix? Not many, as we have been discussing here. Alternatives to sitting on the couch and staring at the TV? I don't have time to list them all.

-Suntan
post #23 of 103
Quote:
Originally Posted by stanger89 View Post

Problem is (other than Amazon) nobody has a subscription streaming service do they?

Amazon is probably going to be netflix's biggest problem. With the amazon market integrated into the kindle tablet, amazon wants to be your main content provider for movies, music, and books.

P.S. this could also give apple some serious pain.
post #24 of 103
Quote:
Originally Posted by MrBobb View Post

And the alternatives are...?

For unlimited streaming?

Amazon. It's cheaper ($80 for Amazon Prime/12 months, plus you get Amazon prime)...but the current selection is quite weak compared to Netflix IMO. It has very little device support

Hulu Plus. Has decent content, but on principle alone, I can't stand having to watch commercials after having paid for Plus. Part of the reason I ditched cable. Really lacking with older shows. No movies.
post #25 of 103
This is a blunder on the scale of New Coke.
post #26 of 103
I got the e-mail from NetFlix this morning and my response is, frankly I don't care. I'm a disc-only subscriber with Netflix/Qwikster or whatever the heck they want to call themselves (again, I don't care). The division of services saved me money with the new pricing structure.

Streaming from NetFlix is for old titles only, most of which I've probably seen already (at least the ones I'd be interested in). Streaming from any provider still isn't up to the same standards as Blu-Ray, but it is getting better. Then again, they're mostly older titles and of no interest to me.

I get approximately 16 movies per month on average with the 2-disc-at-a-time plan. I actually have to look for movies to place in my queue to keep it full, so I end up with a lot of obscure foreign films and TV shows. I rarely have enough time to watch more than a few movies per month so where do all those movies go, you ask? Why, they're copied to my server where I can access them at my leisure when I find the time. Once viewed, they're deleted to make room for more movies.

While technically this is not considered legal, the actual time frame when I view a rented movie is nobody's business but my own. It's basically my own video on demand setup with far better quality and more current titles than what NetFlix streaming can offer. What's ironic is that by the time I get around to actually watching a title it's probably been on HBO and every other cable channel six months to a year before I ever see it. Still, I'd bet they're still not available to stream from NetFlix when I see them.
post #27 of 103
I think it is a good move. If one or the other of the two paths die, it does not kill the entire company off. Seperate each portion from the potential failings of the other. Very smart.
post #28 of 103
Got my email today.

We apologize for throwing this at you so fast with no explanation. Boy we screwed up. To make it up to you, we are going to do the exact same thing by making you use two different web pages and issuing you two different credit card charges. This way next month it will be a lot easer for us to raise are rates and only piss off half of you at one time.
post #29 of 103
Seems to me Netflix made the same mistake the content creators made, they got greedy. Netflix had a good thing going, but trying to charge 60% more for something you've been giving away for free was never a good idea. It would have been smarter to incrementally raise rates over the course of a few years.

I really can't understand how Netflix expects customers to pay more for streaming while they are actually losing content. Expand your catalog first, THEN increase rates.
post #30 of 103
Quote:
Originally Posted by ZenerDiode View Post

For unlimited streaming?

Amazon. It's cheaper ($80 for Amazon Prime/12 months, plus you get Amazon prime)...but the current selection is quite weak compared to Netflix IMO. It has very little device support

Hulu Plus. Has decent content, but on principle alone, I can't stand having to watch commercials after having paid for Plus. Part of the reason I ditched cable. Really lacking with older shows. No movies.

Yeah, I think Amazon will take the lead from netflix.
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