While Netflix isn’t all the way back to highs pre-The Worst Price Hike of All Time, they pretty much got all those people back by the end of the year. Maybe not the same people, but replacements anyway. Thus Netflix ended 2011 with 24.4 million subscribers, just a touch off the 24.59 million they had before Netflix CEO Reed Hastings was branded One of the Most Awful Human Beings Ever last summer. People realized, “Hey, this is still a really good deal,” and so the reports of Netflix’ early demise were greatly exaggerated. This is not a surprise whatsoever.
610,000 New Subscribers Joined At The End Of 2011
No one doubts that the price hike was announced with the delicacy of a bowling ball’s introduction into a baseball game. A lot of people were confused and hurt. But, it’s not like Netflix’ service has a bunch of capable competitors. Mainly, because premium content costs so much. We heard rumors of Verizon wanting to get into the game last year, but those stayed rumors probably because the amount of dollar bills for content could stretch to the end of the universe and back, plus a firstborn. Netflix still lost 13% of their profits last year, buying content and expanding their business around the world.
Ah, but what about Amazon and Hulu Plus? Don’t they have a whole bunch of streaming content that hopes to compete against Netflix? Well, this is what Netflix had to say about that:
“Both Amazon and Hulu Plus’s content is a fraction of our content, and we believe their respective total viewing hours are each less than 10% of ours,” executives said in a letter to shareholders.
So Amazon and Hulu Plus have a long way to go before they even hope to match Netflix. Still, Netflix realizes in that their expansion overseas, they may have been a little in over their head. With subscriptions pretty slow in the early going, they have no plans to expand more until they are profitable again, which they don’t think will happen for at least two more years.
Plus, as this well-reasoned article over at Video Nuze points out, Netflix has lost a lot of people who used to combine streaming and use the DVD service (because it was, after all, one service that wasn’t splintered in two), and DVD’s still account for a lot of their business (in fact, DVD-only subscribers increased in the face of the emphasis on streaming). Still, I think Netflix was going to take this hit sooner or later. They did indeed hurt themselves for the present by trying to get into all-streaming too soon, but with the rising prices of content and the perceived “death of the DVD,” they made a move (in the wrong way) that they knew they would need to smooth over time. The question of whether they can be back to increasing subscribers at high levels (year-over-year) is still up in the air.