Daily Pulse

Netflix shares tumble

David Brancaccio Oct 25, 2011

Netflix stock could use some mouth-to-mouth today. The company’s shares fell more than 30 percent today, the first time they have been below $100 since the summer of 2009. And keep in mind, as recently as July the stock traded at more than $300 a share.

Neftlix’s big loss follows news that it lost 800,000 customers in the last three months as it tried — and failed — to spin off its DVD-by-mail business and force customers to stream video online. A price increase, and a now-canceled scheme to chop the company in two, alienated hundreds of thousands of customers. And Netflix is facing increased competition for viewers from a number of sources.

News that consumers may need their cash for something other than watching movies at home slows the Pulse today.

So why the sudden drop in confidence overnight?

According to Marketplace Tech Report host John Moe…

Netflix actually had a nice increase in revenue in these results, but it’s that drop in subscriptions that freaked out investors. And when you’re freaked out or upset, Netflix is an easy service to cancel. If you’re mad at Bank of America, leaving takes a long time and a lot of hassle.

So, as people got mad about the pricing changes, the split, and the whole Qwikster debacle, they could just ditch. And that means also, of course, that people could later come back just as easily.

Netflix’s blunders could possibly help competitors like Hulu Plus, which recently hit 1 million subscribers. But Hulu Plus and Netflix aren’t exactly either/or propositions, Moe says. One has more recent shows, one has a bigger catalog. They’re also only $8 a month.

Plus, even if Netflix’s stock is weak, it still has 24 million subscribers and just expanded to England. Check out the rest of John Moe’s Marketplace Morning Report interview with Jeremy Hobson for more analysis.

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