Just when statistics seemed to suggest that Netflix had little to fear with the status of their current market dominance in online streaming, the rise of rival services could now be seen as arriving sooner rather than later, after Netflix revealed their customer numbers have dropped significantly in Q3 2011.
Of course, the main event that triggered this defection of subscribers was what most people saw to be an unreasonable price hike from the streaming giant, but while the company had predicted their numbers falling a little as a result of this, they admitted that they saw the eventual drop of over 800,000 US users as unexpected. This means that they have gone from 24.6m at the end of June, to 23.8m at the same point in September, unlike Netflix’s own estimates of being on 24m at that point.
Soon after the news was announced, share values in the company dropped by 27% (to $87), and CEO Reed Hasting revealed that they are now slowing down their plans for overseas expansion. Hasting said: “Pausing is a good thing from an investor standpoint. We are going to pause and restore our global profitability.”
Hastings also made it clear that Netflix do not need a marketing charm offensive to regain public support (despite market anylysts predicting that the customer drop will not stop until November, and leave them on 20m for their streaming service), adding: “Our streaming marketing has been very effective in the past two years. We are going to work on improving the user interface, expanding to more platforms and delivering more content. There’s no grand gestures, there’s just a lot of steady and intense efforts”.
While Netflix remain defiant in their opinion that they are very well-liked, will their paying customers soon suggest otherwise?