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Netflix Dodges Qwikster's Bullet in Q3, But Pricing Changes to Kill Q4 Results
Netflix's Q3 earnings are in, with the company reporting it lost just over 800K U.S. subscribers to end the quarter at approximately 23.8 million subscribers. Although it's a dreadful performance compared with Q3 '10 when it gained 1.8 million subscribers, the reality is it could have been much, much worse. As I wrote earlier today, Netflix had lowered its Q3 U.S. target by 1 million to 24 million, on September 15th. But the Qwikster split-off was only announced 3 days later, unleashing a fury of negative sentiment. The big question was just how that sentiment would translate into subscriber losses. The answer turns out to be "just" another 200K vs. the reforecast.
Categories: Aggregators
Topics: Netflix
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What To Look For In Netflix's Q3 Results Later Today
After the market closes today Netflix will release its highly anticipated Q3 results, which will lay bare the full consequences of the company's decision to
raise its rates, spin off the DVD operation as Qwikster, and then reverse itself, all of which happened during the chaotic quarter. The key thing to look at is how all of this affected U.S. subscribers - how many new ones were acquired during the quarter, how many churned out and of course what the ending total is. After all the ink that's been spilled speculating on management's decision-making, these metrics - plus its Q4 guidance - will reveal just how severe the impact of all these decisions really was.
Categories: Aggregators
Topics: Netflix
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Netflix Stock Hits 52-Week Low Amid Fear of a Potential Q3 Subscriber Debacle
If Netflix investors were hoping that the company's decision to scrap its Qwikster spin-off might re-energize its beaten-down stock, then they'resorely disappointed as it instead hit a new 52-week low today of $111.62, down nearly 5%, even as the Dow Jones rallied by 330 points. On the positive side, the DVD reversal shows Netflix management was willing to be flexible, but on the other hand, the quick change unnerves investors looking for a steady hand on the tiller.
Mostly though, the number 1 question now is why did management abruptly change course and dump Qwikster overboard?
Categories: Aggregators
Topics: Netflix
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Netflix (Partially) Comes to Its Senses, Drops Qwikster DVD Plan
Whew. Sanity has (partially) returned to Netflix as the company has announced that it won't pursue a colossally misguided plan to split off its DVDoperations as "Qwikster" after all. A blog post from CEO Reed Hastings begins "It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs."
While this is certainly true, what the post leaves unsaid - but which is even more fundamental to Netflix - is that DVDs remain absolutely essential to the company's success and will for some time to come. By not fully embracing this, the company seems to be ignoring reality. No doubt this led to the Qwikster move in the first place, and now also raises the risk of additional missteps down the road.
Categories: Aggregators
Topics: Netflix
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Exclusive: More Netflix Subscribers Still Use DVDs Than Streaming for TV Viewing
Streaming may be the future, but for the present, more Netflix subscribers age 13-54 still use DVDs and Blu-ray discs to watch TV shows and movies on their televisions, according to a new research report that Knowledge Networks will release later this morning. As the chart below shows, among those surveyed, 29% said they use DVDs and Blu-ray to watch Netflix content at least once per month on their TVs, while 20% said they use streaming to watch on their TVs.
For Netflix users the TV is still the primary viewing screen; 44% of those saying they use Netflix at least once a month use their TVs to watch, with 30% using a computer and 11% using a mobile device. Even among those using a computer, DVD usage is holding up pretty well, with 9% of respondents who watch Netflix at least once per month saying they use DVD, and 15% using streaming. This data, along with other results in the research, raises further questions about whether Netflix acted prematurely in deciding to split off its DVD operations to focus on streaming, a point I have made previously.
Categories: Aggregators
Topics: Knowledge Networks, Netflix
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Amazon Kicks Off Its Kindle Tablet Week With Fox Deal
Amazon has announced a new licensing deal with Fox that will bring "24," "Arrested Development," "The X-Files," "Ally McBeal," "Buffy the Vampire
Slayer" and "The Wonder Years" to its $79/year Amazon Prime service (all of the titles except the latter are already available on Netflix streaming). The Fox deal comes just ahead of a press conference Amazon will hold this Wednesday, in which it is widely believed to unveil a new color Kindle Tablet that will play video and compete head-on with the iPad.
Categories: Aggregators, Broadcasters
Topics: Amazon, Kindle, Netflix
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DreamWorks Gives Netflix A Much-Needed Lift, But Not Until 2013
DreamWorks Animation's new output deal with Netflix gives the beleaguered streaming-only provider a much-needed lift, but unfortunately not until
DreamWorks' 2013 movies are released. Under the deal, Netflix may pay up to $30 million per movie, an increase from the $20 million that HBO is believed to have been paying DreamWorks. The press release also notes that some of DreamWorks' catalog movies such as "Kung Fu Panda," "Madagascar 2," "Chicken Run" and "Antz" will also be included over time. The DreamWorks deal comes on the heels of last week's news that Netflix licensed library programs from Discovery Communications.
Categories: Aggregators, Studios
Topics: DreamWorks Animation, HBO, Netflix
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New Blockbuster Movie Pass Features DVDs in Starring Role
Irony was on full display at the Dish Network press conference announcing the new Blockbuster Movie Pass, as the very first benefit CEO Joe Clayton pointed to was access to 100K+ DVDs by mail (with no extra charge for Blu-ray). That's right - despite Netflix's willingness to practically blow up the company in its belief that "streaming is the future," good old Blockbuster is returning to its roots, emphasizing physical media's primacy, at least for now. That Blockbuster was outgunned by Netflix's own superior DVD-by-mail service years ago just adds to the sense that "all that's old is new again."
Categories: Aggregators
Topics: Blockbuster Movie Pass, DISH Network, Netflix
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Netflix Now Conceding Price Hike Is Also Hurting Q3 New Subscriber Acquisitions
Just when you thought things couldn't get worse for Netflix, here's a tidbit of information that could have significant consequences for the company: in aQ&A session at the Goldman Sachs Communacopia conference on Wednesday (replay here), CFO David Wells conceded that while cancellations due to the price increase announced in July accounted for most of the 1 million downward revision in end of quarter subscribers, the change has also adversely impacted new subscriber acquisitions (though he declined to quantify by how much). I believe this is the first time a Netflix executive has acknowledged a double whammy resulting from the price increase - both higher than expected churn and a slowdown in additions.
Categories: Aggregators
Topics: Netflix
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Winners and Losers Due to Netflix's Decision to Split DVDs
Netflix's bizarre decision to separate its DVD business from its streaming business will have significant ramifications for the video ecosystem. Below are some of the clear winners, potential winners and clear losers.
Categories: Aggregators
Topics: Amazon, Apple, Blockbuster, DISH, Facebook, Google, Hulu, Netflix, Redbox, VUDU, YouTube
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Netflix's DVD Split Is Yet Another Self-Inflicted Wound
How many self-inflicted wounds can a company take before its mortality is threatened? When it comes to Netflix, the question is taking on increasingrelevance. The company that could do no wrong for the past two years first shot itself by announcing an onerous price increase without any real attempt to explain itself or soften the blow. The initial consequences of that decision came last week in the form of a 1 million subscriber downward revision and a 50 point drop in its stock price. Now Netflix has followed up with another bewildering move, announcing a re-branding and separation of its DVD by mail business as "Qwikster" complete with an independent web site. In my view this is another self-inflicted wound with even more serious implications.
Categories: Aggregators
Topics: Netflix
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Netflix's Q3 Subscriber Loss Could be Churn AND Acquisition Related
With Netflix today lowering its Q3 U.S. forecast by 1 million subscribers to 24 million, many observers are focused on the culprit being higher churn induced by the company's recent pricing change. Churn could well be the big driverhere, but the cause could also be the other side of the equation: a slowdown in new subscriber acquisitions, particularly for those just wanting the DVD-only plan. Until we get the actual breakdown with the Q3 results, we won't know for sure, but if it's both factors, then Netflix might be finding itself at the beginning of a very different chapter in its evolution.
Categories: Aggregators
Topics: Netflix
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Netflix To Lose U.S. Subscribers in Q3, First Loss In Over 4 Years
Netflix revised its guidance for Q3 this morning, now forecasting that it will end the quarter with 24 million U.S. subscribers. That's 1 million less than the 25 million it previously forecast as the mid-point for Q3 subscribers (despite the loss, Netflix is maintaining its financial guidance for the quarter). Since Netflix ended Q2 with 24.59 million U.S. subscribers, it is now expecting to lose 590K subscribers in Q3, the first time the company has contracted since Q2 '07 when it lost 55K subscribers.
The expected Q3 loss brings to a screeching halt the torrid growth Netflix experienced over the 6 most recent quarters, when it doubled in size, adding over 12 million subscribers in the U.S. The Q3 reversal can be traced to the controversial decision Netflix ham-handedly announced in July to split its DVD and streaming businesses, therefore resulting in steep monthly price increases for a large number of its existing subscribers. As seen in the chart below that Netflix released this morning, the primary driver of the 1 million downward revision from July 25th is on the DVD-only side, which is now forecast at 2.2 million subscribers vs. the 3 million expected. The 200K balance is from streaming-only subscribers. This split is a good news-bad news story for Netflix.
Categories: Aggregators
Topics: Netflix
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Amazon Planning to Give Away Its Instant Videos With the New Kindle Tablet? Uh Oh.
Catching up on my reading last night, I noticed toward the end of the first hands-on review I've seen about Amazon's forthcoming Kindle tablet
something that could be very disruptive. According to the writer (so this is opinion, not fact), to support the Kindle tablet, Amazon plans to give buyers a free subscription to Amazon Prime.
Of course, since last February Amazon Prime subscribers also gain access to Amazon's growing streaming Instant Videos catalog. So this would mean that Kindle tablet buyers would be getting lots of great video (and more to come) for no charge and presumably no ads either. If Amazon were to begin giving away high-value content as a marketing tactic supporting its devices, it could fundamentally change the game for everyone.
Categories: Aggregators, Devices
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Inside Starz's Netflix Quandary
Here's a thought experiment: Imagine you're running a major cable TV network and your fastest-growing distributor (and largest, by number of subscribers) offers to license your content for approximately $300 million each year, a sum that is about 10 times the amount it has been paying under the current deal struck less than 3 years ago. The new deal would have a very material impact on your P&L as your company's operating income last year was about $400 million. Seems like a pretty tough offer to turn down, right?
However, there are certain catches. First, this distributor is considered a disruptive competitor by all of your other long-time distributors (who collectively paid you about $1.3 billion last year). If you proceed with this new deal, you're concerned that these other distributors may retaliate by paying you less when they renew their deals in the future. Second, this distributor wants a degree of exclusivity that limits your ability to make incremental deals with companies it deems as competitive. Third, key suppliers of your content have escalation clauses that entitle them to incremental payments if you proceed with this new deal, which would in turn erode your margins. And last, but not least, the manner in which this distributor wants to compensate you would alter the way you are positioned in the market - from a "premium" to a "basic" channel - consequently risking a perception that your content will be irreparably devalued by consumers and other distributors.
Got all that? If so, then you grasp the quandary that Starz's executive team found itself in as it evaluated a huge license renewal offer from Netflix. Last Thursday Starz announced its decision, choosing to rebuff Netflix's rich offer, at least for now. But as the math below shows, combined with what I've learned from individuals familiar with Starz's economics, Netflix's putative $300 million/year offer was far more than Starz could generate otherwise, making its decision to walk away all the more difficult.
Categories: Aggregators, Cable Networks
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Happy Labor Day and End of Summer
Happy Labor Day to VideoNuze readers here in the U.S. and to all, a happy end of summer. Many of us are getting in some time off before back-to-school and back-to-work realities kick in next week, and so no there's no new VideoNuze content today. However, I'll be back on Tuesday, with regular VideoNuze coverage.
Kicking off next week, I'll provide analysis of the Starz-Netflix non-renewal, and what the implications are for each party. As VideoNuze readers know, I've been a keen Netflix observer and this latest turn of events is part of the larger story of Netflix reckoning with its own massive success, as TDG's Colin Dixon and I forecast would happen this year. The Starz situation is illustrative of Hollywood's wariness in dealing with a far bigger and more influential Netflix.
See you on Tuesday, and enjoy your holiday weekends!Categories: Miscellaneous
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Scarcity Breeds Aggregation Opportunities
Following is a guest post from Sam Vasisht, president of 21TechMedia which specializes in advisory services, business and marketing consulting for digital media companies. Sam was previously VP of Marketing at On2 Technologies, now part of Google's WebM initiative. He blogs at www.techmediatalk.com and can be followed on Twitter @21TechMedia.
Scarcity Breeds Aggregation Opportunities
by Sam Vasisht
Based on news from the world of online video over the past few weeks, the dust is starting to settle on a number of topics that had been contentious, if not controversial for some time. Among them is the affirmation of online services as a bona fide monetization model for major media. This was stated by Viacom on its earnings call two weeks ago. Similar signals from other corners of the industry range across Netflix's price increases in its continuing quest for premium content licensing; Amazon stepping up its game in video streaming with a licensing deal with NBC and a few weeks earlier with CBS; and Hulu attaching attractive 5 year content licenses with its rumored sale offer while signing up additional content deals as well.
The race for content aggregation is on.
Categories: Aggregators, Devices
Topics: Apple, Best Buy, Hulu, NBC, Netflix, Viacom
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Hulu Pushes Further Into Originals With Morgan Spurlock's "A Day In the Life"
Hulu is partnering with director Morgan Spurlock ("Super Size Me") to exclusively distribute "A Day In the Life," a six-part documentary series in which each episode will follow one celebrity for a full day. The first episode, which debuts on August 17th, will focus on Virgin's Richard Branson. Episodes will roll out on subsequent Wednesdays on Hulu.com and Hulu Plus and will feature singer will.i.am, comedian Russell Peters, musician Girl Talk and others. Each episode is 22 minutes and will include ads. Spurlock provides more background in a video interview after the break.
Categories: Aggregators
Topics: Hulu, Morgan Spurlock, Netflix
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Friday Fun: Jason Alexander's "Netflix Relief Fund" and Microsoft Office 365's "Gmail Man" Videos
A little Friday fun - if you haven't yet seen former "Seinfeld" star Jason Alexander's hilarious "Netflix Relief Fund" video on Funny or Die or Microsoft Office 365's "Gmail Man" videos, it's time to take a break and do so. I promise both will lighten your day and prompt you to share further. Then get back to work. Both videos are after the jump. Enjoy!
Categories: Indie Video
Topics: Funny or Die, Microsoft, Netflix
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Friday Fun: Jason Alexander Lampoons Netflix Price Increase on Funny Or Die
A little Friday fun - if you haven't yet seen former "Seinfeld" star Jason Alexander's hilarious video lampooning Netflix's recent price increase on Funny or Die, it's well worth it. Alexander's mock heartfelt pitch for the "Netflix Relief Fund" is sure to resonate for everyone who's been up in arms about Netflix's recent price change. Video after the jump. Enjoy!
Categories: Aggregators
Topics: Funny or Die, Netflix
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