As Subscribers Flee, Netflix Shares Plunge

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Published 17 Sep 2011
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BY VICTORIA CRAIG



Netflix shares plunged 19 percent Thursday as the company announced it expects to lose...
BY VICTORIA CRAIG



Netflix shares plunged 19 percent Thursday as the company announced it expects to lose one million subscribers in the third quarter alone. Market News Video reports the shares actually began to fall after the company lost a crucial partner earlier this month.



“Deal talks with Starz Entertainment fell apart, and the company said it would not renew its contract with Netflix for streaming movies and TV shows from its library. Starz’s library includes offerings from Disney and Sony Pictures.”



And KTVU reports--backlash from newly increased prices is another reason behind Netflix’s falling share value.



“Until September, Netflix offered plans where customers could get DVD rentals and unlimited video streaming for as low as $10 a month. Now, if customers want both the minimum is $16 a month and those higher prices are driving away customers.”



And there’s another problem--Hollywood. One investor tells CNBC he doubts Netflix will be able to come up with enough cash to pay the industry for the movies it already provides.



“How are they going to pay back that obligation to Hollywood that’s now  over 2 billion dollars with subs(cribers) slowing. They’re going to have to spend more and the reality is at some point Hollywood’s going to cut them off and say I’m not going to give you any more content because I don’t think you’re going to be able to pay it back.”



To make matters worse, one analyst tells The Wall Street Journal investors are fearful because even the Netflix’s CEO doesn’t own direct shares in the company.



“The CEO has sold $1.0 to $1.5 million of stock on almost a weekly basis (total of $32 million) and continues to not own any direct shares.”



But Fox Business reports one investor isn’t giving up on Netflix just yet.



“He doesn’t think that the days are over for Netflix. He gave this stock a buy rating saying that the heightened churn does not fundamentally change the positioning of Netflix as the best investment in the still early stages of a worldwide streaming video explosion.”
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