This is not some earth-shattering revelation, but Netflix has now publicly confirmed that it expects at least a million subscribers to jump ship over the coming months. The movie streaming/rental company revealed these projections in a letter to shareholders that was not quite an apology.
“We know our decision to split our services has upset many of our subscribers, which we don’t take lightly,” explained CEO Reed Hastings.
Hastings was referring to Netflix’s decision to double the cost of combined streaming and DVD mail-in rentals by splitting each service into its own $7.95 price tag. Users all over the web immediately voiced their complaints, and some even threatened to cancel their subscriptions. Apparently, some actually have and will continue to do so.
In the long run, however, Netflix says it believes the move was necessary and will benefit them by generating more revenue to acquire more streaming movie and TV show licenses from content providers. One content provider, Starz recently quit its relationship with Netflix, and there is no doubt that it will be looking to regain some of its content from other sources.
Many have seen this coming for quite a while. Netflix also made its financial concerns public long before the price hike when it revealed the high cost of postage for mail-in DVDs. Netflix foots the bill for DVDs and Blu-ray dics that customers rent on an unlimited basis for a monthly subscription fee.
Streaming, Netflix argued, is more cost effective, but customers have complained that many of the popular movies that are available on DVD are not available for streaming. That will require more licensing and content providers willing to cooperate, something Netflix has struggled with since its inception.
This entire PR fiasco will cost Netflix $8 million due to lost subscribers, something shareholders will surely not take lightly. Whether or not they share the company’s optimism remains to be seen.
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