Netflix states the obvious…

October 28, 2011

Even if you’re not a Netflix (NFLX) customer or own a share of their stock, chances are you’ve caught a headline or two about their woes, which can easily be summarized like this: bad decision-making on the part of the company’s senior executives. (This WSJ video does a nice job of summarizing the issues). To be sure, they’ve paid the price, with the shares having fallen nearly 70% over the past three months. According to a short item in the WSJ, CEO Reed Hastings’ personal net worth has declined by a whopping $640 million. That’s enough to make most CEOs think twice about their next big idea.

And, yet, we were still taken aback by something we found in the 10-Q that Netflix filed late yesterday. Let’s just call it stating the obvious. Here’s a snip:

In July 2011, we introduced DVD only plans and separated the unlimited DVDs by mail and unlimited streaming into separate plans. This resulted in a price increase for our members who were taking a combination of both our unlimited DVDs by mail and unlimited streaming services. We made a subsequent announcement during the quarter concerning the rebranding of our DVD by mail service as Qwikster and the separation of the Qwikster and Netflix websites. The consumer reaction to the price change, and to a lesser degree, the branding announcement, was very negative, leading to significant customer cancellations and a decline in gross subscriber additions. We subsequently retracted our plans to rebrand our DVD by mail service and separate the DVD by mail and streaming websites. If we do not reverse the negative consumer sentiment toward our brand and if we continue to experience significant customer cancellations and a decline in subscriber additions, our results of operations including our cash flow will be adversely impacted.

Really? You don’t say!

Image source: Technorati

————

It’s Q season here at footnoted and we’re literally buried in filings. We’re giving footnotedPro subscribers our best finds first. To find out more, please contact us.

Leave a Reply

You must be logged in to post a comment.