For movie fans, October 24 will be a big day.
That's when Netflix reports third-quarter earnings and when we should learn more about how many Netflix subscribers were alienated by recent and controversial changes to the service.
Rivals, investors, and customers will be watching closely to see how many subscribers the company possesses for the quarter ending September 30. Not only can we compare the subscriber number to the same period last year, we can also stand them up to Netflix's July projections as well as revised estimates given last month.
When Netflix reported second-quarter earnings, the company predicted it would come out of the third quarter with 25 million total U.S. subscribers. But that was shortly after the company announced it was splitting up a popular hybrid subscription plan that offered access to video streamed over the Web as well as DVD-by-mail for $10 per month. The company would ask hybrid users to start paying $8 a month each for discs and streaming.
Many fans of the hybrid plan were angered by the price hike.
Then, on September 14, Netflix leaders, who acknowledged underestimating customer reaction to the rate increase, announced that they had lowered subscriber estimates and said it expected to end the third quarter with 24 million, a 4 percent shortfall. Then came a whopper. Netflix CEO Reed Hastings said the company would split itself into two services. Netflix would oversee streaming video operations, while a new service called Qwikster, would take over DVD-by-mail.
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Once again, subscribers took to the Web to rant and rage. Analysts bashed the idea and the name of the new company (one said it sounded like a vacuum cleaner instead of a video service). Investors did the most damage, sending Netflix shares into steep decline.
Shares topped $300 in mid-July but in morning trading today, the stock was down to $114.
Here's what Netflix has going for it: the company officially killed the old hybrid plan last month. This means many people may not have noticed higher charges on their bank statements yet or weighed the decision to keep the service or not. Some researchers say they've seen signs subscriber cancellations are beginning to slow.
Perhaps more importantly, Netflix managers are a group accustomed to having its back against the wall. A decade ago, nearly every one on Wall Street thought Blockbuster would crush the Internet upstart. Doubters said Netflix's mail-order rental business was a gimmick. Once again, four years ago, when Netflix began pushing hard into distributing movies over the Internet, the naysayers said adoption would be slow because Web-connection speeds were too slow and there was no way to watch Internet movies on a TV set.
Netflix quickly overcame all those adversities. Maybe the question is, how fast can it work its way back from this?