Netflix's Future Streams Cloudy - NBC Bay Area

Netflix's Future Streams Cloudy



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    Just how much is a cup of latte worth?

    If you're Netflix, it could be worth millions. The Los Gatos-based movie rental service posted better than expected earnings Monday afternoon but its stock price still went down.

    Angry subscribers and a decline in quarterly subscriber growth is enough to scare investors who worry the trends are indicators of what is to come.

    Netflix made headlines -- and not for the right reasons -- when it announced it would raise its DVD and streaming plan subscription rate by about 60 percent.

    The Los Gatos-based company increased the price for its unlimited streaming and DVD subscription from $9.99 a month to $15.98 a month.

    The jump was less than what many people spend on a trip to the local coffee shop but it was enough to anger Netflix's loyal customer base and to worry investors.

    For a stock that's trading at over $254 a share, it's not hard to rock investor confidence.

    But perhaps the most important lesson learned from subscriptionpricegate was that investors are worried about the one thing Netflix has been able to develop better than anything else: loyal subscribers.

    Despite making a push to switch its operations from mailing DVDs to instead streaming movies and television shows, Netflix is not so much a technology company -- a la Apple, Google or even Facebook -- as much as it is a service-based technology company.

    Like Groupon, Netflix's success relies on its interactions and perceived interactions with its customers, more than its technology -- although network outages don't help calm customer anger. Once that gets shaken, people are going to worry.

    If a $7 price hike was enough to anger loyal subscribers, what are investors to think if those numbers are already dwindling before the price hike?

    Monday Netflix also showed its subsriber base was shrinking, which market analysts cited as a reason for the long term forecast of the company.