Netflix stock continues to fall; analysts see more woes ahead

[marmar]

SAN FRANCISCO -- Netflix stock's free fall accelerated Tuesday as the shares reached a 20-month low amid intensifying concerns about the video subscription service's ability to overcome public relations problems and competitive pressures.

The latest in a wave of share sell-offs followed Netflix's decision to raise $400 million from investors by issuing debt and selling 2.86 million shares of its slumping stock. That served as a reminder that Netflix hasn't been bringing in as much money as management anticipated from a price increase that triggered mass cancellations and damaged the company's once-sterling brand.

Wedbush Securities analyst Michael Pachter, who had predicted Netflix's crash when it was still a hot commodity, interpreted the fund-raising as a sign of more trouble ahead. He lowered his price target for the company's stock from $82.50 to $45.

In a Tuesday research note, Caris analyst David Miller described the fund-raising as "a rhetorical signal" that the company is still struggling to retain subscribers after a mass exodus in summer and early fall. He dropped his price target from $77 to $59. ..................(more)

The complete piece is at: http://www.freep.com/article/20111123/BUSINESS07/111230341/Netflix-stock-continues-fall-analysts-see-more-woes-ahead?odyssey=mod|newswell|text|FRONTPAGE|p

[vi5]

1. This is what happens...

when a company believes hype.

Netflix streaming was/is a kernel of a really good nugget of an idea. And streaming will at some point be the future.

But the fact is that Netflix streaming and what it had available was only appealing to a very niche audience of rabid movie fans rather than the general public. So as soon as they got some hype from that corner of the internet/business world they got convinced that streaming was going to be their bread and butter. Which eventually it might be, but the fact is they too quickly neglected the one that brought them to the dance (dvd by mail service) in favor of the attractive, popular new date they wanted to have.

It was stupid and now they are paying.

And yes, I know the studios are just as much to blame, but Netflix didn't have to put so many of their eggs in the streaming basket to allow them to be put in the crappy position they find themselves in today.

[PoliticAverse]

3. Netflix needs the studios more than the studios need netflix. n/t

[vi5]

5. I'm not disputing that.....

But Netflix pushed full steam ahead with going all in on a product extension (streaming service) without any sort of guarantees on availability and pricing from the studios. And in the process their flagship brand (the dvd by mail service) suffered. So now both of them are failing.

They should have realized when they kept giving up concessions to the studios and getting very little in return that it was going to end up this way.

They kept delaying even the disc availability on new releases because the studios were convinced that if people had to wait a month to rent a new release on netflix than instead of pirating it or just waiting, that they would instead go out and buy the dvd or blu ray). Netflix agreed to these windows/delays for the promise of more streaming content, which never materialized. So they limited the availability of new releases on DVD, and in return got years old catalog titles that nobody really cared about in the first place for their streaming service.

It's a shame since I've always been a fan of netflix initial model and service. But they really have nobody to blame but themselves for their piss poor decisions.

[skypilot]

11. Thanks for this info.

The last of the video rental stores (TLA Video) in my neighborhood closed a couple months ago so I was forced to check out Netflix. I was so depressed at their selection and lack of availability. It's only been since TLA closed that I've even considered streaming or dvd by mail, so I'm not very knowledgeable about the best sites. I'm really open to any recommendations.

[robinlynne]

22. I use netlfix by mail. I LOVE it. The price went down when they divided

the streaming and mail service. I used to pay more. I don't have the streaming gizmos, and I just rent in the mail. Couldn't be happier.
I spend 23 per month, and I get 4 films a week. It is my only "pleasure" or "fun" expense, no cable TV , no eating out.

[madrchsod]

2. i`m getting blockbuster just for the music videos

their catalog of movies is also impressive.

[quinnox]

4. oh crap, I hope netflix survives this

this is starting to look like a total free fall and that could lead to bad things.

[demigoddess]

6. I want netflix to survive as well, but it seems that they made

a few mistakes
1. raising fees in the middle of a deep recession
2. assuming everyone wants just the big blockbuster movies. ( I use netflix to see Midsomer Murders and other mysteries and tv shows from the UK. American stuff is usually violent c****!
3. not understanding that change is happening very rapidly in this area right now. They should not have made us choose between streaming and mailed DVDs. It would have happened naturally. Many people quit because streaming stuff was c***, and they did not want to rely on mailed DVDs only. They wanted both but not at double the price. If they had kept both and raised just a dollar or two they would not have lost so many customers.

[tsuki]

13. Oh, someone who enjoys English mysteries.

Cheers

:toast:

[robinlynne]

23. me too!!!!

[Yavin4]

7. The Mailing of DVDs Has No Long Term Future

Customers are impatient. They're not going to wait for a movie to come in the mail when they can stream it.

[Romulox]

10. Investors are buying the coming quarter's profits. Not the "Long Term Future" (in title form!) nt

[dems_rightnow]

16. Only investors who lose money

Real investors are ALWAYS looking to the future.

[Romulox]

18. Um, the next quarter *IS* the future. Perhaps you're confused? nt

[dems_rightnow]

19. No, though the wording was bad.

Investors are looking WAY beyond next quarter. You're just mistaken in your belief.

[Romulox]

20. We all have different time horizons. Nonetheless it is not opinion to say that quarter over quarter

and sequential quarterly earnings growth is a primary metric used by investors to gauge the value of a company.

In other words, the long term future of DVDs isn't driving the current decrease in Netflix stock price; it was their lousy earnings last quarter, and their prospects for lousy earnings for the next quarter that is resulting in the rapidly declining stock price.

After all, Netflix's stock price was hammered AFTER it announced a switch to streaming only. Going back to DVDs was a response to investor and consumer pressure. :hi:

[Xithras]

12. That notion keeps getting repeated, but I'm not so sure...

Even while total entertainment spending is in decline, and while the tech pundits keep claiming that the "disc is dead", the reality is that Blu Ray sales are up and keep climbing. Online and kiosk disc rentals have also climbed this year. http://www.reuters.com/article/2011/08/05/us-media-bluray-idUSTRE7745Y320110805

Conventional DVD numbers are dropping sharply, but BluRay certainly isn't. What we're seeing today is the equivalent of the shift from VHS to DVD. The old technology is going out, and the new technology is supplanting it.

Streaming is certainly biting into the market too, but bandwidth is going to play a huge role in governing how quickly that will happen. You can stream a DVD quality movie across the Internet with a 3 megabit connection, but people are moving beyond DVD quality and have been buying HD televisions for a decade now. BluRay video averages 20Mbit, and peaks at up to 54Mbit, which is simply beyond the capability of 95% of American Internet connections. Even worse, the few people I know who DO have connections that fast pay $100+ a month for it, which places it well beyond the budgets of ordinary Americans. It's going to be a LONG time before any significant number of Americans have 50+Mbit uncapped connections in their homes, at an affordable price.

So, people with good quality TV's (pretty much anyone who has bought in the past year) have a choice. They can spend $50 on a cheap Blu-Ray player, rent disks for a couple bucks a night, and watch their movies in spectacular HD quality; Or they can stream them off Netflix for $96 a year, but at the cost of a significant and visible loss in quality.

I do both. I stream movies using my Blockbuster Movie Pass, and I get my discs from that same service and Redbox. When I watch a good movie though, it's nearly always on disc. The quality difference makes the wait worthwhile.

[Yavin4]

14. When You Run A Business, You Go Where The Market Will Be

Not where it's currently at. The DVD rental model cannot compete in the marketplace with streaming.

[Xithras]

15. History is full of failed companies that were ahead of their time.

When you run a business, you go where the market is going, not where it will eventually end up. Get too far ahead of your customers, and you'll find yourself standing on a lonely road.

Streaming will eventually supplant discs. There's really no question about that. The problem is that we're probably still a decade away from the point where HD-capable bandwidth will be ubiquitous enough for the movie studios to actually move away from physical media. The average broadband speed in the United States last year was 3.9Mbit. This year, the number is actually DOWN to 3.8Mbit. Not only is that number still a LONG way off the ~20Mbit connections we'll need for proper lossless BluRay streaming, but the numbers are going in the wrong direction. As Americans tighten their belts, many of them are either dropping their broadband entirely, or are turning their speeds down to get onto a cheaper plan.

Netflix is putting itself where we will be eventually, but that won't keep it afloat if it continues to torpedo it's disc unit.


* on edit: I should mention that there's a caveat to all this. I have Dish Network, which is part of the reason why I dropped Netflix for BB recently. One thing that BBMP does, that Netflix CAN'T do, is true BluRay-quality online movie rentals. They actually get around the bandwidth problem by downloading true Blu Ray quality movies to your DVR, and prevent you from watching it until it's downloaded. With these types of movies, you pick them off the list, and a message pops up saying "Your movie will be ready for viewing in 3hours, 16 minutes", or something like that. When the movie is downloaded, it shows up on your DVR, and you just hit play. They only do this for HD new releases (older releases and DVD quality releases use realtime streaming like Netflix), but it's a great workaround for the quality/bandwidth problem on new titles where viewers want true uncompressed HD. I adapted to it pretty quickly, and just started going through the list on Thursday or Friday, marking any movies that I want to watch that weekend. That way, when I'm actually ready to watch, the movies are already downloaded and waiting.

AFAIK, this method is patented, so I don't think Netflix can go this route. Still, they may be able to come up with something similar to get around the bandwidth problems. Betting the future of a business on a technology that hasn't been invented yet doesn't seem wise though.

[Yavin4]

26. "Streaming will eventually supplant discs.There's really no question about that."

Thank you for agreeing with me.

[robinlynne]

24. some customers. I'm happy with the mail. the only reason netflix tried to go to

streaming was to cut their postage costs. not to get movies faster. That was never an issue I ever heard spoken of.

[TorchTheWitch]

27. I always thought it was a stupid idea

When I want to rent a movie I want to watch it NOW not when it comes (if it comes) in the mail days later when I may no longer be interested or have the time. I also don't want it in my mailbox because our mail carrier is an idiot and doesn't always deliver the correct mail to the correct address, always shoves the big pieces of junk mail in the mailbox so the lid won't close and it rains or snows all over my mail (I really fucking hate that), and this is not a good neighborhood where something useful that comes by mail is very likely to stay in your mailbox for long.

I also hate streaming since my computer isn't hooked up to the tv, and I don't have any desire to go through the trouble of doing that or having to buy whatever contraption I'd need for doing it. As I understand it, the selection blows, too, and I don't have much interest in most current movies. I also don't want to be paying a monthly fee when I only watch movies occasionally... I go through long periods where I don't have the time or desire to watch movies interspersed with periods where I may watch several in a day depending on what's going on in my life and what I feel like doing.

As far as I'm concerned nothing beat the neighborhood video rental store that had a huge selection, you paid per movie and could get them to watch immediately without needing anything more than a DVD player and a tv. And it's Netflix that's responsible for killing that. There's not a single video rental store anywhere near me anymore, and Redbox and similar machines suck since the selection is horrible.

[Hutzpa]

8. I think the studios out smarted them

Netflix got sucker punch.

I just hope block busters don't come striding in and taking everything
they have worked hard for, because block busters are waiting in the wings to
take advantage of their immature move.

[Romulox]

9. "In the first nine months of this year, Netflix spent $200 million buying back its own shares..."

"In the first nine months of this year, Netflix spent $200 million buying back its own shares, at an average price of $222."

http://allthingsd.com/20111122/why-the-netflix-buyback-strategy-worked-like-magic-until-it-totally-failed/

Now they are SELLING more stock at $70? Brilliant strategy, Mr. Hastings. :eyes:

[Confusious]

29. I thought you were suppose to do that

when the price was low.

But then again, what do I know? I never went to an ivy league school and/or am not a crook.

[Raven Lunatic]

17. Thank God I never got into that shit

"They know they have guns, right?" Disgusting.

[slay]

21. Netflix won me over when they signed a deal funding a forth season of Arrested Development!

i mean how cool is that - COME ON!

‘Arrested Development’ to return on Netflix
By Jen Chaney
11/21/2011

"When the “Arrested Development” cast and crew recently announced plans to reboot the Bluth family, fans were excited. Then they were cautiously optimistic. Now they can be excited again ... as long as they have a Netflix subscription.

In case you missed the news, which was announced late Friday night, Netflix has made a deal to stream new episodes of “Arrested Development” beginning in 2013. That deal was struck between Netflix and the studios backing production on the new mini-season of Bluth-Funke shenanigans, Fox and Imagine Entertainment, the company co-founded by ”Arrested” producers Brian Grazer and Ron Howard."

more: http://www.washingtonpost.com/blogs/celebritology/post/arrested-development-to-return-on-netflix/2011/11/21/gIQAv2MghN_blog.html

[Skip Intro]

25. I really like Netflix. Hard to imagine ever paying cable or sat bills again.

[astral]

28. Here's how desperate Netflix is.

I don't have a TV, never had a Netflix subscription, although I checked them out and considered it once and do not recall if I ever sent them any personal information or not. So we have a power outage this morning, and when the power comes back on my computer automatically put itself back online when I turned it on, and my screen had a pop-up window from NETFLIX running in my ZONE-ALARM program (which alarmed me in itself) which wanted me to answer "Yes" or "No" as to whether I would try Netflix for free -- and it set it up so I couldn't use Zonealarm without clicking on the window, and I couldn't "END PROGRAM" to get rid of it either.

This really creeped me out. I try to keep my computer sweeped out every day and block most anything from happening without my permission, so they must have paid Zone Alarm to set this up.