The Netflix Exodus Begins As New Prices Take Hold


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The tumultuous 2011 for Netflix appears to be taking its toll as subscribers move away from the movie rental business because of dissatisfaction concerning price and subscription changes, alterations that, when announced, rocked the Internet to its core.

While Netflix has been preparing for customer turnover, because it's apparent people want another option in relation to movie rentals, which is something that undoubtedly sounds great to Redbox. Well, that and their dissatisfaction with the Netflix price hikes. It's becoming apparent that, until Netflix substantially improves its streaming movie catalog--a difficult proposition as long as content providers keep leaving--the choice between DVD rentals and streaming movies isn't an easy one. Granted, Netflix's release schedule for DVDs has also been affected by other content providers, so by the time you get a popular new release in your mailbox, it's not so new anymore.

With all of that in mind, when Yahoo Finance reports that Netflix expects to lose 600,000 customers in the United States during the month of September, it's hard to be surprised by this news. It's also hard to be surprised by the fact that Netflix's stock to a hit this month as well.

The question is, can Netflix sustain its current business model? While the immediate reaction may be "Netflix is doomed," a snippet from Yahoo's article indicates reports of Netflix's early demise may have been premature:

Even with fewer subscribers, Netflix expects to bring in $10 million to $25 million more from its customers than during the July-September period than it did April-June. Emphasis added.

It stands to reason that some of this revenue will come from customers who forget to change their subscription package, or from the ones who want both streaming and physical DVD delivery, it doesn't explain the July-to-August periods. Did all that negative press actually help their bottom line?

However, when you look at the potential exodus numbers now that the price changes have taken hold, the two are not congruent. While subscriptions may have increased during the summer, adding to the Netflix bottom line, the outlook does not remain as positive, especially with the news about Netflix's expected customer loss. So what does this mean for the home movie rental business? Yahoo has more:

Many of the people no longer renting DVDs from Netflix will get their discs elsewhere. That could be a boon for Redbox, which rents DVDs for $1 per night through 33,330 kiosks in supermarkets and other retailers, and Blockbuster, which still has 1,500 U.S. stores after emerging from bankruptcy protection under the ownership of Dish Network Corp. Investors are betting Redbox will be the main beneficiary; the shares of Redbox owner Coinstar surged $3.33, or more than 7 percent, to close at $48.55 on Thursday.

If Amazon can beef up its content on Amazon Instant Video service, it, too could knock Netflix farther down the home movie business totem pole.

What about you? Will stick by Netflix or are you moving on to Redbox and other services that offer streaming movie options?