AfterDawn: Tech news

Netflix customer base erodes in second quarter

Written by Rich Fiscus (Google+) @ 24 Jul 2007 11:29 User comments (12)

Netflix customer base erodes in second quarter Yesterday Netflix announced that the number of subscribers to their DVD rental service dropped in the second quarter of this year. This is the first quarter in the company's history that subscriptions to the industry leading online rental service have dropped.
This follows their announcement on Sunday of a $1 price decrease to match the pricing of Blockbuster's online rental program. Industry analysts blame competition from Blockbuster for the loss of subscribers. The company still reported a profit of $17 million.

In the past, Netflix has seemed somewhat resistant to competition, at least in part due to their patents for using an automated queue of movies to be delivered and selling subscriptions to rent a specific number of items at a time. They've even managed to not only compete with Wal-Mart, but even get the retail giant in their corner after the fight.

If they've shown a weakness in the past it's been in the time customers have to wait for their DVDs. In 2005 they settled a class action lawsuit regarding their claims of 1 day delivery times and unlimited DVD rentals. One of the biggest complaints from ex-customers is that Netflix uses a technique known as Throttling to penalize subscribers who don't make them as much money by making them wait longer for their DVDs. After the lawsuit was filed they denied those claims, but eventually changed their terms of use to specifically allow it.

Blockbuster's approach, on the other hand, takes advantage of something Netflix doesn't have - over 5,000 brick and mortar stores throughout the United States. Their rental plans include some where movies can be returned to their stores and even get a Limited number of free rentals there.

Netflix has responded to competition from Blockbuster by adding a Streaming media service that's automatically available with their subscriptions. Unfortunately this service requires an internet connection with a minimum sustained download speed of 1Mbps for low quality video or 3Mbps for near DVD quality. Still, for people who don't want to visit a retail store, or don't have that option based on where they live, it's still a big improvement over a minimum 2 day wait to receive their movies through the mail.

For consumers this has turned out to be a win-win situation. With both companies focusing on competing with the other, their customers have benefited from additional services that come at a lower price. Much like the well publicized battles between Intel and AMD for CPU dominance or nVidia and ATI for the graphics card market, no matter which company is ahead on any given day, arguably it's the public who are the real winners.

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12 user comments

124.7.2007 11:51

I want a satellite reciever box that includes a hard drive, and allows me to stream a movie to my TV for a small fee. Kinda like Xbox Live. That would be worth paying for. And im not talking about pay-per-view; those movies are months old anyway.

224.7.2007 16:51

Sounds pretty bitchin', but that 'small fee' isn't going to work. You know they'll charge an arm and a chicken leg.

324.7.2007 16:55

Been a loyal Netflix subscriber for over 2 years now and haven't had a single problem with them. Personally I have had no problems in the time it takes to get a new DVD, for instance if I put my watched movies in the mail on Monday then I normally recieve my new ones on Wednesday. I don't know if that has anything to do with where I live (Fredricksburg, VA) but that's a great turn-around in my opinion. The only issue I have is that new DVD's seem to be so popular that you'll be waiting a bit to get them, but that's a same for brick-n-mortor stores.

424.7.2007 17:07


I live in Brooklyn, New York and the turn around for Nflix is great here too. But like you said the New Release thing can be frustrating. I've used Nflix off on for a few years now and I have to say Bbuster is the best when it comes to New Releases, both online and in-store. But I hope Nflix turn things around, that video-on-demand thing needs a better movie selection.

524.7.2007 18:21

Check the Redbox website to see if there is a location in your state. Here in Las Vegas I can get new releases around 11P.M. because the ones that were check out have to be returned by 9 P.M.

New Dvds are only $1.00 each

624.7.2007 22:18

Looks like the competition maybe getting to Netflix thats why they are altering. Never used either service so dont know. prefer going to the video shop myself :)

724.7.2007 22:52

I've had Netflix from almost the beginning, and have never had any problems with them. Never tried the Blockbuster service, but competition will only keep them on their toes.

826.7.2007 7:05

I'm usually happy with Netflix, but I can't rent a Blu-ray disc to save my life. They need to increase their stock. I got Dreamgirls and Stir of Echoes BD, but forget POTC2 or Bridge to Terabithia. I know they are popular titles, but it's getting ridiculous. I tried BB Online's free trial, but they were worse, except they didn't have a lot of DVD titles I wanted. I might just rent BDs at Blockbuster brick and mortar.

I do like the new streaming movie feature. It's nice to preview a movie before I rent the disc. The only thing is I have to boot up in Windows to do it (I'm on a Macbook).

927.7.2007 13:16

I have been using netflix for several years. I have never had a problem with them. Only an occasional defective DVD which they replace fast. The only problem i have is that new relased movies usually take a while to be shipped , short and sometimes long wait.
But overall i like them.

1027.7.2007 17:03

I just hope that Blockbuster goes down in flames for all the times I had to pay that pissy late charge for getting a VHS tape back 15 minutes late.


1128.7.2007 4:52

I am new to this website for posting but thought this might be helpful!! Here is the trick to getting the New Releases from Netflix. The new releases are released on Tuesdays. What you need to do is make sure you put your DVD's in the mail on Friday or Saturday before the date of a new release you want. They receive your rented DVD's on Monday morning first thing. So, if your new releases (still with the release date by the title of the movie in your que)are at the very top, 99% of the time, you will get that new release for Monday shipping and receive the new releasing movie for the release date on Tuesday. I have been with them for about 2 years now and figured that out after being frustrated to wait on the new releases. I have shared this tip with a few of my friends and they are getting the same results. So good lucky everyone! Hope this helps.

128.8.2007 8:51

Sorry, but I've very unhappy with they way NetFlix will hold disks. I returned 2 disks on a Sat (B4 sort) to their main P.O. and it would have been in their P.O. Box on Mon. AM waiting but it's now Wed afternoon and they still have not credited my account with the return(after 3 days?). I emailed them and then called, they said they were sent to another P.O.(60 mi away) and they shouldn't have left "that" building. Some kind of delay always happens, every week. The best I can do is 1 exchange per week even dropping it in there own P.O. I've had them about 2 years and it just keeps getting worse.

This message has been edited since its posting. Latest edit was made on 08 Aug 2007 @ 14:30

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