Netflix customers vote with their feet on hike
September 16, 2011
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Netflix's decision to raise prices by as much as 60 percent is turning into a horror show.
The customer backlash against the higher rates, kicking in this month, has been much harsher than Netflix Inc. anticipated. That prompted management to predict Thursday that the company —the largest U.S. video subscription service— will end September with 600,000 fewer U.S. customers than it had in June.
It will mark just the second time in 12 years that Netflix has lost subscribers from one quarter to the next. The last downturn occurred during 2007 when Netflix lost a mere 55,000 from March through June.
The current hemorrhaging exacerbated fears that Netflix is losing the magic touch that increased its stock tenfold in the three years leading up to the company's July 12 announcement about its higher prices.
Since then, Netflix has turned into Wall Street's equivalent of a box-office flop. Its shares plunged $39.46, or about 19 percent, to close at $169.25 Thursday, leaving Netflix's stock price more than 40 percent below where it stood before the company unveiled the higher prices. The cost to shareholders so far: more than $6 billion in paper losses.
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