Damage Control: Will Netflix Bounce Back from Reaction to Price Increase?

By Rob Scott
December 1, 2011

Wedbush analyst Michael Pachter believes Netflix cannot repair itself from the damage inflicted earlier this year after the streaming company raised prices on subscribers.
CNET reports that, “according to Pachter, by year’s end, Netflix will show a loss of 11 million ‘hybrid’ customers that previously rented DVDs and streamed video content. He said he believes that 7 million of those customers will have traded down to the streaming-only option, while another 4 million will have ‘quit the Netflix service altogether.’”
Shareholders also seem uncertain if Netflix can bounce back. “Over the past six months, the company’s stock is down 75 percent,” indicates the article.
Netflix has not given up, and believes things can be turned around. However, the company offered this honest evaluation: “If we are unable to repair the damage to our brand and reverse negative subscriber growth, our business, results of operations, including cash flows, and financial condition will continue to be adversely affected.”
In the wake of a devastating couple of months, the company is looking to rebound “brick by brick” with a strong rebranding, suggests a related Home Media Magazine article.
In addition to ongoing damage control, Netflix is working to increase its content selection, update its interface and improve user algorithms. These changes, the company hopes, will restore credibility after its recent 60 percent price increase led 800,000 people to unsubscribe.

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