1. Netflix is lowering the price of the 3-out subscription plan to $17.99 per month, starting in November.Read more.
2. Amazon is entering the DVD rental maket, according to Netflix.
3. Netflix announces GAAP Net Income of $18.9 million for Q3 2004, based on revenue of $141.6 million for the quarter.
4. Netflix has postponed European expansion plans to focus on the increasing U.S. competition.
5. The churn rate remained constant at 5.6% since last quarter.
6. The stock dropped from $17.43 per share to $10.99 in after-hours trading tonight.
7. Netflix is expecting to break even over the next year instead of being profitable.
Mike says Netflix is on the defensive, trying to deal with increased threats from competition with Amazon, Blockbuster, Walmart, Greencine; hence the price change and the more conservative strategies. Sounds about right to me. He has a list of links to news reports around the Web.
I just got 15.99 with a three month minimum
ReplyDeleteBlockbuster said Friday after trading hours that they will lower their online price to $17.49
ReplyDeleteper month to compete with Netflix. They also stated that they will not be undercut on price no
matter what it takes!
Now I look at this two ways: 1. Blockbuster is desperate and if they don't establish their base
online customers in vast numbers very quickly, they will go under. 2. They are going to go all the
way with this online model and make a huge business transistion in 2005. Costing them a lot of
money and while attempting to balance their thousands of stores along with the online rentals that
will ultimatly be hurting their stores at the same time. I read below in the article that a very
large chunck of Blockbusters cash comes from late fees from lazy customers, so with all of their
current customers switching to their online service I belive their stores will do less revenue
because of this. I mean how could the stores do better than they have done before Netflix?
Especially when Blockbuster is hurting themselves now too. I think they will have to lower their
in-store price for a DVD or something.....something has got to give for Blockbuster just as well
as it did for Netflix this month! Especially since both stock prices are now very close and also
because now each company has a $17.00 price for monthy subscription. I think maybe if the online
rental model is not profitable for Blockbuster in the next year then they will have to close
stores or slash prices.
Besides, Blockbuster is owned by Viacom and Netflix is owned by Netflix.....meaning that if
Netflix is aquired by TimeWarner or Verizon as I've read in rumors, then Netflix will be solid for
sure and that is always an option that Blockbuster doesn't have. Either way I am confident that
Netflix is going to be allright expecially since they are now competitive with thier new low
monthly prices.
I also read an article I wanted to send you but I lost it, anyway it said that what Netflix is
doing the smart thing now because when E*Trade was new a few years ago it didn't take competition
seriously and took all of it's profits every quarter and it led to the competition gaining
customers. Those customers became loyal to another company back then and never left. Same with the
trades, meaning E*Trade kept their trade price at $20.00 while newcomer Ameritrade was doing a
trade at $7.00. The article said that if E*Trade would have gone for customers instead of profits
they would have nearly double the customers they have today. Also they would have fended off a lot
of the competition that they have today by lowering prices early. Now those customers they lost in
those years are forever with another company.
Also I read that the massive advertising caimpaign that both Netflix and Blockbuster has in
store for the holidays will boost consumer registration by a lot. They said that this may be the
plan and then they will steadily raise the price as they gain the right amount of customers etc.
By the way I read that in mid summer Wal-Mart only had 40,000 subscribers compared to the two
million something that Netflix has. Also I read that Blockbusters claims that they will gain more
subscribers before 05' than Netflix had in it's first year and a half is highly misleading. The
reason is because Netflix didn't get it's large jump in subscribers until 2002 and they were
already public by that time with nearly 600,000 subscribers. Netflix started in 1998 so they had
ben around for nearly four years before they had gone public with nearly 600,000 subscribers, so
it's no great feat that Blockbuster is boasting on those numbers. I think blockbuster is in
trouble more than they are telling us. And maybe Wal-Mart will quit after it sees that they just
can't get the subscribers compared to the others after the holidays. Have you ever even seen an
advertisment for Wal-Mart rentals? Not me.
I doubt they are going to be able to put blockbuster out for a very ong time. blockbuster is not just going to give up they are considerably bigger and hav viacom's cash.
ReplyDeleteI think netflix problem is that once we get into VOD they are not going to have much of a competative model. why are the content producers/owners and the broadband pipline companies going to want or need a third player as a middleman? netflix won't have anything to add to the mix.
I think their real worryfor the time being is that blockbuste and amazon could easily afford to destry their hpes for profitability. they are trying to scare amazon, but can't keep prices this low for long. remember blockbuster will be drastically incrasing its selection for mail order, which is its only neflix's only advantage. combine that with some coupons for in store byblockbuster and you have a very competative and cash draining situation for netflix
I think Netflix wanted to lower their prices last July, after all the backlash from the price increase, but they couldn't. Now is a great time, because they can blame it on Amazon, rather than admitting they'd made a mistake back in May.
ReplyDeleteI think the thing that scares Netflix about Amazon is that Amazon has the network, databases, and shipping infrastructure to handle an almost overnight implementation if they decide to go with DVD rentals, whereas Blockbuster and Walmart had to start from scratch with distribution centers and databases, etc.