Netflix (NFLX) faces customer backlash, weak economy

Netflix has angered many of its customers with its new plan to split its service into two while raising prices. Netflix stock (NFLX) has lost a quarter of its value in the past week.


By Mark Trumbull, Staff writer / September 19, 2011


Netflix's Chief Executive Officer Reed Hastings speaks during an interview with Reuters in Buenos Aires earlier this month. In a blog post Sunday, Mr. Hastings admitted he 'messed up,' especially as the share price of Netflix (NFLX) has plunged in the past week. But he held firm to the price increase that the company had already announced.

Enrique Marcarian/Reuters

Netflix CEO Reed Hastings says "I messed up," but the apology doesn't appear to have calmed customers who are frustrated over the video firm's plan to raise prices by breaking its popular product in two.

A key reason: Mr. Hastings apologized about the way the decision was communicated, not the decision itself.

In in a blog post Sunday he held firm to a plan that promises to make video rentals more costly for millions of users. If those users remain Netflix customers, that is.

Now, users who have been using a bit of DVD-by-mail and also a bit of web-streaming video will see two separate bills, and a higher total price, than they paid before. The streaming service will retain the Netflix name, while the by-mail business will adopt the new name of Qwikster, Hastings announced in his communiqué.

Netflix (NFLX) stock fell on the news. The high-flying company has lost a quarter of its value in the past week as traders analyze the impact of the price increase.

Price hikes can be a hard sell for customers at any time. But it's particularly challenging at a time when the economy is weak, and millions of Americans are looking for ways to cut their monthly bills.

That's one of the reasons Netflix faces a customer backlash.

Here's one example of the feedback posted in the responses to the Sunday announcement: Ross Brandt wrote to Hastings that "you've financially drilled and disrespected your customer base with the cost increases, and now you are making it harder for them to manage their queues and basically charging them for it."

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Ben Trentlage, in another response, writes: "So, to summarize: 'Oh we're so sorry. We didn't think anyone would notice that 60% price hike. To make it up to you, we'll decrease convenience by separating services.' "

Other customers said bluntly that they are dropping the service because, in their view, it is no longer worth the money.

Not all Netflix customers are seeing a 60 percent price hike, but that's the boost for people who want to continue to have access to both streaming and DVD rental (which is now $15.98 per month, up from $9.99).

Netflix itself has estimated that its customer base is declining by about 1 million people during the current quarter, which ends Sept. 30.

Pricing is far from the only customer concern. Many users are complaining equally, or even more loudly, about a cheapened user experience as the service splits from one product into two.

An oft-heard lament: Instead of going to one "movie" company, users are now being asked to search separately for DVD and streaming content.

source: http://www.csmonitor.com/Business/2011/0919/Netflix-NFLX-faces-customer-backlash-weak-economy