Netflix is crashing and burning in pre-trading as the company just released a statement to shareholders that cut forecasted subscribers by 1 million users. This comes after Netflix started rolling out new plans that effectively jacked prices up 60% for the most popular plan. As of this post’s writing, Netflix is down 15% [update below] and falling, almost erasing the company’s stellar 19% growth over the last year.
The new estimate puts the company’s DVD-only subscriber count at 2.2 million, down from the previous projection of 3 million. Estimates for Netflix’s streaming subscriber base have been lowered as well: the user count is pegged at 9.8 million rather than the old estimate of 10 million. Even with the lower subscriber count, Netflix isn’t revising its Q3 financial outlook, which it expects to still be on target despite losing 1 million subs.
Netflix stated they expected losses after rolling out the new plans, but they clearly didn’t expect this type of backlash. However, as stated in the letter [PDF], while they highly regard their customer’s opinions, the company still feels they made the right decision separating their streaming and DVD businesses. This allows the now-separate divisions to focus on their part of the business without having to deal with the other: for example, global streaming services are no longer tied to domestic DVD business and so on.
Change is hard and Netflix’s stellar success in going from start-up to superstar is commendable. But now that they’re at the top, if you will, the big kid on the playground, its history will be written with how it proceeds from here. No doubt a short-term goal is to recover the recent lost subscribers while increasing its DVD and streaming offering. As a bored Netflix subscriber myself, content is king and, well, the streaming library isn’t getting any bigger.
Update: This post was written before the market opened. Netflix ended up starting today at $177, down 14.9% from yesterday’s closing price of $208.