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Netflix Is Free-Falling With No Parachute

10/25/2011

Netflix is free-falling.

The company reported announced that it lost 810,000 customers during Q3, compared to net subscriber additions of 3.3 million and 1.8 million for Q1 2011 and Q2 2011 respectively. Netflix execs estimated the loss of subscribers to be about 600,000 – so they missed that one by a long shot.

The company’s stock is coming back to earth at an alarming rate as well. Just 4 1/2 months ago Netflix was trading at over $300 per share. Yesterday Netflix shares shed $33.09, or nearly 28 percent, to $85.75 in Monday’s extended trading. Revenue has risen but that is likely short-lived as more subscribers bail due to price increases – some as much as 60 percent.

What seems odd is the complete lack of marketing or communication since the infamous letter from CEO Reed Hastings on September 19th. In my post “Netflix Needs To Be Fixed” I pointed to the need for Hastings to send an “I owe you an apology PART II”. At that time I felt communication to subscribers was critical. Now Hastings needs to apologize to subscribers and shareholders.

The next 6 months are more than just critical for the company. It is survival time. I don’t believe Netflix has an emergency parachute to stop the free fall.

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