The year of Netflix’s decline: Customer satisfaction, stock price, more

Capping off its awful year, Netflix has again made headlines with a steep drop in customer satisfaction, according to a holiday retail survey released today by analytics firm ForeSee. The firm notes that the company used to be neck and neck with Amazon.com for tops in the yearly survey. But this year, Amazon climbed two points to 88 out of 100, while Netflix fell seven points to 79.

How did the former Wall Street and Silicon Valley darling get here? The Los Gatos company’s downhill slide started in mid-July, when it decided to raise fees for customers who subscribed to both DVD and streaming-video rentals. CEO Reed Hastings had been pushing for the company to make the transition to streaming-only. Netflix then decided to split its DVD business from streaming, a move that sparked even further backlash — and one it reversed about a month later. (See After a Qwik(ster) intermission, Netflix DVD and streaming reunited.) Hastings has since admitted that Netflix acted too quickly, though he vowed to stay the course. In its third-quarter earnings call in October, the company: reported that 800,000 subscribers had dumped the service; predicted that the exodus would continue; and said it would probably go into the red next year, partly because of costs related to securing content. (See Netflix: From summer of discontent to ‘nuclear winter’.)

Other key numbers that have declined as a result of Netflix’s missteps: Shares of the company are down more than 2 percent to about $69 today, off about 77 percent the high of $298.73 they reached in July. And Hastings’ stock options for next year reportedly have been slashed in half to $1.5 million, according to a company filing last week. (The Los Angeles Times points out that two other Netflix executives will be making more than Hastings.)

Some of the effects of Netflix’s blunders are tougher to quantify. The billions of dollars in lost market value have sparked talk of Netflix as a possible takeover target. Among the possible suitors that have been mentioned include Verizon and Microsoft. The reputation of Hastings, the company founder and CEO, who was named Fortune magazine’s Businessperson of the Year in 2010, has taken a major hit. He’s now on a list of worst CEOs of the year, for example. And despite Hastings’ smart vision of streaming video as the future, Netflix’s moves may have helped to hold streaming back — although there are myriad other factors. (See Paused: the online video revolution.)

 
 

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  • dermbuilder

    The trouble is people like Hastings with their wealth just like most members of the US Congress, are completely out of touch with the reality of most Americans. Millions of people have DSL connections which are just not fast enough for video streaming, and millions more only have dial-up. It will probably not be practical to go all streaming before 2020.

  • Saurabh

    I am appalled at how Netflix’s customer satisfaction has dropped this year. People are more satisfied with $100 cable tv than $7 video on demand? IMHO, Netflix fell out of favor of the big Hollywood cable companies who are using this small issue of price hike to acquire this firm..

  • I’ve had Netflix’s “1 DVD + streaming” plan for quite a while. It used to let me stream 2 or 3 programs simultaneously to different devices. No more–they’ve begun limiting it to 1 stream. I asked if I could pay extra to get multiple streams back. Nope: the only way to get 2 streams is to sign up for the “2 DVDs + streaming” plan; for 3 streams you need the “3 DVDs + streaming” plan, and so on.

    This makes no sense to me. And since I hardly ever use the DVDs, it would be a big waste of money.

    Sad to see such a promising company circling the drain.

  • Larry Shoemaker

    Their current streaming service may seem to offer a lot. However recent first run movies are absent. They do have a good number of 3-4 star movies that didn’t make the theatres. A plus for them. Perhaps interactive updating would be a plus. Some people use the service more than others and eventually exhaust the choices that fits their style and standards. If they rotated inventory more based upon utilization, the service might be more compelling. If their goal is to reduce costs by increasing streaming video, then concentrate on making it as compelling and competitive as possible.
    And committ to keeping subscribers better informed of future plans. Most people don’t like surprises. Especially if the benefit is negative.

  • Nari Kannan

    #1 rule for a Visionary -Just because you have a vision, you don’t need to act on it, especially if it is going to cost your customers more, say 60% more!

  • Allan Hurst

    Roughly 75% of the content in my Netflix DVD queue is not available from them in streaming format. That’s what ticked me off so thoroughly during the entire Qwikster debacle.

    And with a plethora of $1/day Red Box (and other brand) DVD rental kiosks springing up all over the place, Mr. Hastings should be feeling very paranoid.

    For several months, I’ve found there ARE streaming alternatives to NetFlix, something else that the company doesn’t seem to want to acknowledge. Amazon Prime Video gives me streaming access to a number of titles that Netflix doesn’t offer in streaming format. So does hulu.

    If Reed Hastings wants to push streaming, he’d darn well better make ALL Netflix content streamable, not just SOME of it.

  • Bill Homan

    The power of the content publishers and copyright holders is far more responsible for the decline in value of a Netflix account than any missteps by Mr. Hastings et al. It seems pretty clear that Hollywood movie and TV producers decided they didn’t want to see a one-stop, un-bundled video on demand service that they did not control, so they have withheld their content from Netflix (and Redbox and Blockbuster Kiosk for that matter) in hopes of driving us customers to current and future services with which they have partnerships, and where they control the bundling. Want to see that latest Acme Studios release? You’re going to have to sign up for an account at Acme’s partner website with a recurring billable and social networking tools that track you more closely and target you with ads. The bottom line is less content at a higher price for consumers — at least until we get smart and turn down these lousy offers.

 
 
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