Simple Terms: Netflix Might Have Screwed Up

UPDATE: Netflix shares closed out the day -4.1%. Blockbuster announced a nationwide promotion with an offer of a 30-day free trial for Netflix customers that are willing to switch. They offer benefits that Netflix doesn’t. They have new releases 28 days before Netflix does. The offer is good through September 15th.

Earlier this week we reported that Netflix was hiking up the prices for their subscription by nearly 60%. Since they announced that hike in price nearly 5,000 mostly furious customers responded on Netflix’s blog post. Analyst Richard Greenfield calls it” perhaps the boldest single move in (Netflix) history.”

According to Deadline, Netflix shares are -3.6% at midday today. Lazard Capital Markets’ Barton Crockett says that “few will pay the jarringly higher price” for the streaming and DVD combo plan and “most will move to Netflix’s cheaper streaming-only service. Netflix could lose some of its most profitable customers — the ones who pay the monthly fee for DVD rentals but don’t bother to order many discs. Goldman Sachs’ Ingrid Chung says “Netflix will probably come out ahead: The company makes a much higher profit from streaming than it does from DVD rental, and a very high number of subs would have to churn off to offset the pricing increase.”

On July 25th executives discuss their quarterly earnings. Where does Netflix go from here? I honestly wouldn’t be surprised to see a lot of people skipping out on Netflix and going for Redbox’s $1 a night kiosks.

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