Netflix subscriber and share price expectations revised lower
Michelle Clancy ©RapidTVNews | 13-10-2011
Thanks to recent moves like a 60% rate hike and the decision to separate its streaming video and DVD-by-mail business, Netflix has suffered high-profile consumer wrath and defection.
All of this has prompted one analyst to revise down his subscriber forecast for the leading over the top (OTT) company.
"Netflix's price change and subsequent Qwikster launch did meaningful brand damage that likely reduced subscriber additions and will take time to repair," said Andy Hargreaves of Pacific Crest wrote in a client note.
Qwikster was what Netflix would have called its standalone DVD rental business, but it abruptly cancelled plans to build a separate service (and separate app and Web site) after widespread disgruntlement at the plan. The cancellation so soon "provides evidence that net subscriber additions late in the third quarter and early fourth quarter were below the company's expectations," he added.
Netflix itself had said that it expected a net 600,000 subscribers to cancel service by the end of September because of the price increase.
Hargreaves lowered his 2012 earnings forecast to $6.26 from $6.57 per share, while predicting a future rebound. His 2013 earnings estimate is $8.17 per share, based on 44.5 million streaming subscribers—a number he said could reach 62 million global subs by the end of 2016.
Netflix has been clearly trying to force customers to adopt the streaming-only service, first by implementing a premium for using DVD-by-mail and streaming in one rate plan, and then by announcing Qwikster, which would make necessary a separate account and Website for those interested in retaining DVD-by-mail functionality.
With the policy reversal, subscribers now will be able to use both services with one set of credentials, as it always has been.
Netflix had 24.6 million subscribers at the end of June.