Netflix faces uncertain future after 780,00 member exodus

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After dealing with heavy blows as a result of 780,000 users canceling their subscriptions, Netflix is facing what may be detrimental consequences to the company. The hundreds of thousands of cancelations came when chief executive Reed Hastings announced that the company would be taking a radical direction: Netflix would continue with its online streaming of movies while a new branch, called Qwikster, would deal with the traditional mailing of DVDs. Paired with a  60 percent price hike, it is no surprise to many that Netflix, who notoriously put the nail in the coffin to once thriving businesses such as Blockbuster and Hollywood Video, is now suffering problems of its own. Before the mass exodus of users, Netflix once had a customer base of 24.6 million people, which has now dwindled down to 23.8 million. This is the largest decline the company had seen since its origin in 2004. Netflix had predicted that 600,000 customers would abandon their services as a result of the change.

“We underestimated the appeal of the single website and a single service,” Steve Swasey, a Netflix spokesman, said in an interview with The New York Times. “We greatly underestimated it.”

With the masses of customers exiting Netflix, the company is declining stock-wise. Earlier this July, “stock closed at an all-time high of $298.73 on July 13,” according to Bloomberg. At press time, Netflix closed at $111.62.

“Our streaming marketing has been very effective in the past two years,” Hastings told Bloomberg. “We are going to work on improving the user interface, expanding to more platforms and delivering more content. There’s no grand gestures, there’s just a lot of steady and intense efforts.”

But Netflix is not out of the woods just yet. Experts have predicted that the declines will “level off in November and rebound in December to end at 20 million to 21.5 million” in terms of users who pay the $8 fee solely for the online streaming. For subscribers who choose to pay $16 for both the use streaming and mailing services, one million users are expected to not renew their accounts. Factors contributing to these numbers include the removal of Disney and Sony films, and “the result of a failed negotiation with Starz.” The company hopes to make up for these losses by solidifying a relationship to Dreamworks Animation Studios to begin streaming their films beginning in 2013, and by recently announcing a partnership with AMC to have old episodes of the hit show “The Walking Dead” ready for viewing. Netflix will have to face what

may be heavy competition from big contenders like Google, Apple and Amazon, who have been rumored to have been pondering the decision to stream movies and TV shows. Hulu is also a fierce competitor that Netflix may have to face off with in the future.

“In hindsight, I slid into arrogance based upon past success,” Hastings said. “We have done very well for a long time by steadily improving our service, without doing much CEO communication […] 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.”

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