Netflix‘s recent price hike cost the company 805,000 paid subscribers. Wall Street is treating the news as a disaster. In after-hours trading Netflix shares plunged $32, or 27 percent, to $86.99.
In Q3, Netflix announced a 60% price increase, which went into effect in September. The company had predicted in a letter to shareholders that the impact of the price increase would be limited and the company would finish the Q3 with 25 million total subscribers. The company lowered that estimate to 24 million in September, though.
Hastings followed up by announcing last month he would spin off DVD-by-mail operations into a separate service called Qwikster. It didn't help boost confidence much when he abruptly scrapped the Qwikster plan three weeks later.
For most of the past two years, the Netflix has been one of the great Internet success stories but now is struggling with keeping up to its reputation. "I slid into arrogance," Hastings said.
In keeping with Hastings' new found humility, he also sounded a cautious tone in a letter to shareholders about the company's ability to acquire more streaming-video content.
"The last few months...have been difficult for shareholders, employees, and most unfortunately, many members of Netflix," Hastings wrote in the letter to investors. "We've hurt our hard-earned reputation."
In the letter he also hinted that the subscribers shouldn’t expect too much from the company with regard to the latest films from the major studios.
This is likely one of the reasons why Netflix is playing up films obtained from "mini-major" film studios and reruns of TV series. During the conference call, Hastings was asked via e-mail whether he and his company are satisfied being a "rerun television" service.
"It's not how I would characterize it, but it's not fundamentally inaccurate," Hastings said. "We have incredible complete prior seasons of the last couple of seasons of 'Man Men,' 'Breaking Bad,' etc., and that creates a great customer experience for episodic content."
Looks like by redesigning its strategies, the company is trying to attract the subscribers again.
