After a turbulent few months for the company, Netflix said Monday that it lost 800,000 US subscribers in the third quarter, its first loss in years. Netflix's stock plunged more than 25% in after-hours trading, despite a reported increase in revenue and net income in the third quarter.
This latest hit to Netflix should come as no surprise to investors and consumers. In July, the company announced that it would increase its prices by 60%, triggering a wave of customer backlash. Then in September, cofounder and CEO Reed Hastings said in a mass email to users that the company would split its streaming and by-mail DVD services, with the latter separated into a spin-off business called Qwikster. Netflix scrapped the Qwikster plan only a month later.
Throughout, Hastings has stood by the price increase, even while apologizing for the way he communicated the change. In a recent interview, he said the future of Netflix is in streaming, not in its DVD service, and avoided taking the blame for customer hostility.
From The New York Times:
Twice in the interview, Mr. Hastings linked the hostility toward Netflix's price change and proposed breakup to the angry mood of the country, even citing the Tea Party and the Occupy Wall Street movement by name.
Hopefully Netflix's loss will show Hastings that the reason for the company's trouble is much simpler than that. The answer, long overdue, lies in listening to consumers.