Netflix stock plummets — can it recover?

September 20, 2011

Netflix made a big change and — at least in the short term— it’s backfired on the company in a big way. Netflix stock hit a 52-week low in trading Tuesday, a breathtaking fall from two months ago, when it was trading above $300 a share. Customers have made it clear that the decision to split the company into two separate services on the heels of a price change was a one-two punch that may send subscribers away in droves.

Many customers are probably feeling betrayed by a brand that they’ve helped to build, said Howard Belk, co-CEO and chief creative officer at the branding firm Siegel+Gale. He said Netflix hasn’t done a good job of communicating its changes to customers, though he thinks that the company can make its case with customers if it keeps its message clear.

But, he said, the company didn’t do itself any favors with the Qwikster name. “It’s an uninspired name,” he said, adding that the company’s strategy feels too much like a reaction to earlier uproar over the pricing changes.

“I think customers get it that they’re not going backwards and won’t backtrack on the changes they’ve made,” he said. “And people will get over it. Netflix will lose customers, but they aren’t losing the most important ones for the business model.”

Over at The Motley Fool, analyst Seth Jayson echoed the complaints of thousands of Netflix customers in saying that moving away from Netflix’s simple interface is also fueling discontent. Jayson said Netflix could learn a thing or two from one of its main competitors, Amazon, which provides a one-stop shop for everything. This isn’t the end for Netflix, he said, but stepping away from simplicity was a bad move.

“Keep it simple, and keep in mind this little rule of thumb,” he wrote. “If you are in a service industry and you find Wall Street applauding actions that your customers despise, you should ignore the guys with the rings and the ties.”

Related stories:

More technology coverage from The Post

Netflix, Qwikster: Two sites, two queues

Netflix dilemma: higher prices, less content

Hayley Tsukayama covers consumer technology for The Washington Post.
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September 20, 2011

Netflix made a big change and — at least in the short term— it’s backfired on the company in a big way. Netflix stock hit a 52-week low in trading Tuesday, a breathtaking fall from two months ago, when it was trading above $300 a share. Customers have made it clear that the decision to split the company into two separate services on the heels of a price change was a one-two punch that may send subscribers away in droves.

Many customers are probably feeling betrayed by a brand that they’ve helped to build, said Howard Belk, co-CEO and chief creative officer at the branding firm Siegel+Gale. He said Netflix hasn’t done a good job of communicating its changes to customers, though he thinks that the company can make its case with customers if it keeps its message clear.

But, he said, the company didn’t do itself any favors with the Qwikster name. “It’s an uninspired name,” he said, adding that the company’s strategy feels too much like a reaction to earlier uproar over the pricing changes.

“I think customers get it that they’re not going backwards and won’t backtrack on the changes they’ve made,” he said. “And people will get over it. Netflix will lose customers, but they aren’t losing the most important ones for the business model.”

Over at The Motley Fool, analyst Seth Jayson echoed the complaints of thousands of Netflix customers in saying that moving away from Netflix’s simple interface is also fueling discontent. Jayson said Netflix could learn a thing or two from one of its main competitors, Amazon, which provides a one-stop shop for everything. This isn’t the end for Netflix, he said, but stepping away from simplicity was a bad move.

“Keep it simple, and keep in mind this little rule of thumb,” he wrote. “If you are in a service industry and you find Wall Street applauding actions that your customers despise, you should ignore the guys with the rings and the ties.”

Related stories:

More technology coverage from The Post

Netflix, Qwikster: Two sites, two queues

Netflix dilemma: higher prices, less content

Hayley Tsukayama covers consumer technology for The Washington Post.
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