Netflix says price hike is having a larger than expected impact

Rich Fiscus
15 Sep 2011 14:40

Netflix is lowering projections for subscriber numbers in Q3 by 1 million.
The change is due to customer reaction to the price increase for combined disc rental and streaming plans, which was announced during their Q2 earnings call. The price of Netflix's lowest tier DVD plus streaming plan was doubled from $7.99 per month to $15.98.
Their original prediction of 12 million subscribers to the new combined disc and streaming plan hasn't changed. However, estimates for streaming only and disc only plans have been reduced by 200,000 and 800,000 respectively.
The revised projections were revealed in a letter to shareholders from Netflix CEO Reed Hastings and CFO David Wells.

In the letter, they said:

We know our decision to split our services has upset many of our subscribers, which we don’t take lightly, but we believe this split will help us make our services better for subscribers and shareholders for years to come.

Despite the change, they remain confident their strategy is the best one to follow, largely because separating the streaming and disc businesses is important for expanding their international streaming business.