As a frequent user and potential investor of Netflix, I found this article interesting, as it demonstrates the impact of consumers’ feelings on companies, even those who have been loyal from the start. As most know, Netflix has raised its service prices and just recently announced the separation of the company into Netflix and Qwickster. Since then, Netflix stock suffered a 52 week low, when its all-time high was only a few months ago on July 13, the day after it announced its price increase.
Noticing the decline in company value, Netflix CEO Reed Hastings made a public apology, via blog, regarding the unexplained price increase and stated that it was a result of starting Qwikster. The new company will also add games to its library, which I think will potentially become more successful that GameFly. Since it already offers shows and movies, it is easier for people to simply order games as well. Since the company decided to split, the $10-per-month for DVD mailing and streaming became $8-per-month for each plan. When searching for movies in the digital library I have noticed that some movies are only offered in DVD, which might be due to copyright laws, but all movies are available on DVD.
I do think it was unfair for Netflix to make these changes without warning their customers, and while many people are against the split, it does make sense for the company to reorganize through separation of digital streaming and DVD mailing plans. Since most new customers choose the streaming only plan, they are not subject to the price change or the creation of Qwickster. I, myself, have only streamed their movies. However, I think that the increase in digital libraries for movies and shows will likely cause the DVD to fall, making it easier for Netflix to simply stop Qwickster without having to interrupt or make any further changes to Netflix later on.
While there is a chance that Netflix may come back after the apology and further adjustments are made, I feel reluctant to invest after the continuous decline in the company’s value after these changes.