Wow, when it rains, it pours. After showing some seriously strong growth for years, Netflix, faltered with some bad business choices. They chased off hundreds of thousands of loyal customers, offered a flat, self-serving apology and lost a major chunk of their content. The culmination of all of this? They expect to post a loss next year.
Netflix To Take A Loss In 2012
There's more to it I'm sure. They've got competition exploding at every turn. Even their old bed fellows, Starz, is set to start directly competing with them. Sure, they just raised $400 million to keep operations running, but that was all stock sales and debt. Sort of sounds like the Federal government and look how great they're doing.
The stock is currently down to a flat $71.00, from a 52 week high of $304.79 that is a very major decline. That high, was just four months ago. It seems that consumers do still have some power in the world.
Some of this was Netflix selling stock, some 2.86 million shares at $70, which isn't looking like that great of an investment now for those that purchased I guess.
With the $3.5 billion in contracts they've recently signed, they expect to post a loss next year as they are still hemorrhaging customers.
Good for Consumers
Why do I say it's all good for consumers? Because consumers are one of the main reasons for this fall from grace and stock market heaven. By now, more than a million of you have expressed your displeasure with how Netflix has handled their business dealings and how they have not bothered to think about the impact of their actions. Perhaps they thought they were, as is popular in media these days, too big to fail.
Well guess what, any company that is dependent on consumers, is never too big to fail, it just takes enough of you to stand up for your rights as consumers to make it happen.
The real reason this is all great for consumers is that, there is far more online streaming video competition both in the marketplace now and coming soon. Services like Hulu, Amazon, Flixster, Ultraviolet, Cinema Now, etc are all making it easier than ever to get the video content we want on our own schedule.
While some have expressed disinterest in paying specifically for Starz content online they too are good for consumers.
With limited amount of time to watch content, prices are going to have to come in line with consumer expectations sooner or later because no one would pay $7.99 a month just for Stars like I suggested in a previous article. I certainly wouldn't. However, I might be incline to pay $5 a month which would be the same as some premium on-demand channel through my cable company. However, the benefit is that Starz would be getting that $5 meaning they'd not be splitting it with a cable operator. Why do I think that's good?
It would take less consumers to make that a profitable initiative on their part. That means a better likelihood of it succeeding and expanding.
It also could be the catalyst that many others have been needing to get into the online video industry full bore. If Starz can dare to pull out of Netflix, go it alone and be successful, than anyone could theoretically. Of course it will depend on their content and the value that consumers place on it.
Would I pay $5 a month to five places for all that content? Depends on the content. I wouldn't pay FOX $5 a month because I already get that through Hulu along with a ton of other stuff for $7.99. I might be inclined to pay $5 a month for something like HBO streaming, sans a pay TV subscription, because that's content I can't get on Hulu and I don't want to pay for it on cable even though I would get access to HBO Go. I would rather just have HBO Go and not have to pay $12.99 a month (that's how much HBO is right now here).
Think about how much of that $12.99 a month is going to Time Warner and then think about how many people aren't getting HBO because of that. Now $5, I would totally be down with $5 a month for HBO Go. This is what they still fail to see but what Starz apparently does.
Now Starz probably thinks their content is worth more, especially since it came out that they wanted to be in a new premium tier at Netflix, you know, like cable has. So if that's what they think and they opt for a $7.99 a month fee, I think they're in for a shock on how little we'll be interested.
$5 a month is the key. At least for me. Hulu is great at $7.99 because of the variety of channels. Whatever I can't watch on-demand on cable, I can usually pick up on Hulu plus, they have some other stuff, like Legend of the Seeker which I just finished, that I want to see but can't get elsewhere.
Whew, I've started to ramble. I think you should all pay me $5 a month to read this tripe [winks].