The CEO of Netflix thought he could stick it to subscribers. I was one of them. The firm raised prices. This will go down in history as a classic bonehead move. Netflix will be a poster child of arrogance.
Netflix market value has plunged by $12 billion, or 75 percent, since its stock peaked at nearly $305 a share in mid-July. That’s right around the time that the company announced plans to raise prices as much as 60 percent for U.S. subscribers to rent DVDs by mail and to stream video on devices connected to the Internet.
The higher prices infuriated so many customers that Netflix lost 800,000 subscribers during the July-September period — by far the most the company has suffered since introducing its DVD-by-mail rental service in 1999.
Yesterday, the stock was at $70.
The company is trying to raise $400 million through debt and stock sales.
The saps who bought this turkey in July will never get their money back by holding onto these shares. Amazon is now moving into Netflix’s turf. For $79 a year, Amazon Prime lets you download movies for free. You also get free shipping on the Amazon products you buy. You also can download a digital “library” book a month for free. Match this, Netflix! Not likely. Not ever.
The free market does not reward those who think they have a captive audience. It hammers them. Netflix is one of the best examples in recent history. “We’ve got ’em. Let’s squeeze ’em.” Sorry, Charlie. It doesn’t work that way.
I still have a streaming video subscription at Netflix, but not for much longer. I have signed up for Amazon Prime.
Netflix is in attrition mode. The bonehead move exposed the company as a high-tech high-flyer without a viable marketing plan. It all looked so clear in July — to management and to investors. It was dot-com 2000 all over again. It was AOL/Time-Warner. It was dumb.