Tag Archive: Netflix

NEW YORK » Wal-Mart Stores Inc. is now renting and streaming movies online, many the same day they come out on DVD, in a second bid for a share of popular movie rental and streaming website Netflix Inc.‘s business.

The world’s largest retailer bought video-streaming service Vudu.com 18 months ago and Tuesday started offering 20,000 titles that can be viewed on almost any device with Internet access, from PCs to televisions to Sony‘s PlayStation3 and other Blu-Ray disc players.

Movies are available at Walmart.com to rent for $1 to $5.99 or to purchase for $4.99 and up.

Wal-Mart, based in Bentonville, Ark., has tested the movie-rental waters before. It previously offered a DVD-by-mail service but it stopped that service in February 2010.

netflix earnings

NEW YORK (CNNMoney) — When you’re a new tech company with a cool product, life is good. But once you become an industry leader, pleasing people is a lot tougher. Just ask Netflix.

Netflix enjoyed a strong second quarter, but it wasn’t good enough to satisfy investors on Monday. And the company spent much of its earnings release discussing problems — namely, a recent price hike that launched thousands of online complaints.

Although Netflix (NFLX) reported earnings of $1.26 a share, easily topping estimates from analysts polled by Thomson Reuters who expected $1.11 a share, sales missed forecasts.

Revenue rose 52% to almost $789 million. Analysts were predicting sales of $791 million. The stock fell nearly 8.5% in after-hours trading on the news.

Customers reacted angrily when Netflix announced earlier this month that it’s hiking prices on plans that include DVDs and streaming, in a move that highlights the company’s shift from physical discs to online video.

“It is expected and unfortunate that our DVD subscribers who also use streaming don’t like our price change, which can be as much as a 60% increase,” Netflix said in its earnings release.

The company acknowledged that “some subscribers will cancel Netflix or downgrade their Netflix plans, [but] we expect most to stay with us.”

Analysts asked several questions about the price hike on a post-earnings conference call. One question noted the thousands of comments on Netflix’s own blog announcing the new pricing strategy, as well as tweets under the hashtag #DearNetflix.

But the social media “noise level was actually less than we expected, given a 60% price increase for some subscribers,” said Reed Hastings, the CEO of Netflix. “We knew what we were getting into.”

Netflix price hike? Stock’s pulled back!

Netflix warned that it “will see only the negative impact of the pricing change” in the third quarter. The company expects to earn 72 cents to $1.07 a share next quarter. Analysts had been expecting earnings of $1.09 a share for the quarter.

Nearly 75% of Netflix’s new customers during the quarter signed up for streaming-only plans. Netflix now has 25.6 million subscribers across the globe, up from 15 million customers a year ago. It has about 24.6 million in the U.S. alone.

But the company said that domestic subscriber growth in the third quarter will be relatively sluggish. Netflix expects to finish the quarter with between 24.6 million and 25.4 million U.S. subscribers — close to flat from the current figure.

Netflix said DVD shipments have likely peaked already, but it’s still setting up “a dedicated DVD division” with “no intention of selling it.” The company will resume marketing its DVD-by-mail service in the fourth quarter, something it hasn’t done in several quarters.

Content costs and new competitors: As streaming video gets more popular, Netflix is facing two headwinds: studios and potential rivals.

Netflix was able to score comparatively cheap streaming deals when the service first launched, but now content providers want to be paid more for the content they’re providing. One analyst predicts Netflix’s streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012.

Google and Amazon have launched their own streaming video services, and Netflix’s most direct competitor, Hulu, is on the selling block. Walt Disney Co. (DISFortune 500) Chief Executive Robert Iger said at a conference earlier this month that Hulu’s owners — who include Disney — are “committed to selling” it.

The list of interested potential Hulu buyers includes Google (GOOG,Fortune 500), Apple (AAPLFortune 500), Amazon (AMZN,Fortune 500) and Yahoo (YHOOFortune 500) plus telecoms AT&T (TFortune 500) and Verizon (VZFortune 500). Landing Hulu would give any of them a strong foothold in challenging Netflix.

But Netflix said in a letter to shareholders Monday that it will not bid on Hulu. Netflix cited the fact that “most of [Hulu’s] revenue is from providing free ad-supported streaming of current season TV shows, which is not our focus.” To top of page


SAN FRANCISCO – Netflix is raising its prices by as much as 60 percent for millions of subscribers who want to rent DVDs by mail and watch video on the Internet.

The company is separating the two options so that subscribers who want both will have to buy separate plans totaling at least $16 per month. Netflix Inc. had been bundling both options in a single package, available for as low as $10 per month.

New subscribers will have to pay the new prices immediately. The changes take effect Sept. 1 for Netflix’s current customers.

Netflix isn’t changing the $8 monthly price for an Internet streaming-only option, which the company began offering late last year. But instead of charging $2 more for a plan that also offers one DVD at a time by mail, the company will charge $8 for a comparable DVD-only plan. That brings the total to $16.

Those who want to rent up to two DVDs of a time with streaming will pay $20 per month, or 33 percent more. Those wanting three DVDs at a time with streaming will pay $24 per month, or 20 percent more.

When Netflix unveiled the streaming-only option, it also raised the rates for its most popular DVD rental plans by $1 to $3 per month. Those plans included unlimited online streaming too, as had been the case since Netflix began sending video over high-speed Internet connections in 2007. That means longtime subscribers who want both entertainment options will get their second price increase in eight months.

Behind the increase: Why Netflix is raising prices (AP)








(AP) — Why is Netflix raising its prices? In part, because the company miscalculated how many people still want to receive DVDs by mail each month, a more expensive service to provide compared to its streamed Internet videos.


Netflix has been trying to lure  away from its DVDs by offering cheaper plans that include movies and TV episodes delivered over its Internet . In November, it began offering a streaming-only plan for $8, its cheapest option at the time. Yet Netflix customers aren’t flocking to Internet video as quickly as some analysts said the company expected.

Many consumers are unwilling to give up the trademark red envelopes. DVDs feature newer titles and the latest theatrical releases that aren’t available through the company’s streaming service.

So the company is adjusting its pricing to reflect the cost of its DVD business and to help bring in more money to cover growing expenses for streaming content.

Under the new plan, customers who want to rent DVDs by mail and watch video on the Internet will need to pay at least $16 per month. Netflix had been bundling both options in a single package for as low as $10 per month. But that bundled plan “neither makes great financial sense nor satisfies people who just want DVDs,” wrote Jessie Becker, .’s vice president of marketing, on a company blog Tuesday.

The price hike serves multiple purposes, analysts say. It will likely push more people into the streaming service, which will help Netflix to lower its postal expenses. The cost of shipping a DVD can be as much as 75 cents per disc, while analyst Mike Olson of Piper Jaffrey estimates that it costs just 5 cents to 10 cents to deliver a movie over the Internet.

At the same time, Netflix needs additional revenue to build up its streaming service. In the first three months of this year, Netflix spent $192 million on streaming rights after putting $406 million into the library last year. Licensing costs are expected to jump to $1.3 billion to $1.4 billion next year, said Arash Amel, research director for digital media at IHS Screen Digest.

“Netflix is under enormous pressures from the content owners to write bigger and bigger checks,” Amel said. “It had to find the money from somewhere.”

Netflix had 23.6 million subscribers in the U.S. and Canada at the end of March, double the amount from the same period two years ago. Its stock has risen 147 percent over the past year, compared to a 21 percent gain for the Standard & Poor’s 500 index.

Movie studios and television networks want to capitalize on Netflix’s success by getting the company to pay more for content.

In an example of the growing tension, Sony movies were pulled from the Netflix online streaming service last month because of what Netflix described as a “temporary contract issue” between Sony Corp. and its pay TV distributor, Starz. The issue remains unresolved.

Netflix’s contract to receive content from Starz ends next year, and analysts say Netflix will likely pay a significant amount to renew it. Netflix CEO Reed Hastings said it “wouldn’t be shocking” if Netflix paid more than $200 million per year for Starz’ service, far more than the estimated $30 million a year it is paying currently.

Netflix also wants to bring in more money because, as the company has grown, it is making less per subscriber. It got a monthly average of $11.97 per subscriber in the first quarter of this year. At the end of 2006, before Internet streaming was launched, the average amount paid per subscriber was $15.87 per month.

Still, the increased pricing has alienated Netflix’s customers, who have taken to Facebook and Twitter to complain about the company’s move. Amel, of IHS Screen Digest, said Netflix had tarnished its brand image by surprising customers with the pricing change. But he said  should expect Netflix to push them toward Internet streaming going forward.

“Netflix’s future is not in the DVDs,” he said. “Netflix’s future is in the business of premium pay television delivered over the Internet.”

©2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

%d bloggers like this: