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Qwick retreat: Netflix kills plan to split in two
As if all that were not enough, there was also the matter of the lame new name, which seemed eerily reminiscent of the dot-bomb Friendster. The moniker seems sure to go down in the annals of branding debacles.
Since the Qwikster affair, Netflix shares have slid 28 percent to $112, and consumers are bolting in big numbers.
Netflix had 24.6 million subscribers at the end of June, but it warned last month that it expected a net 600,000 to leave by the end of September because of the price increase. That would be by far the worst downturn in the company’s history. Netflix reports final figures on Oct. 24 for the quarter that ended in September.
Analysts and diehard company fans are left struggling to understand Hasting’s recent moves. Some are worried about the cost to morale inside the company and whether some of Hasting’s A-team could begin to bolt.
Outside, the company faces another war for its reputation. If consumers perceive Netflix as a loser, it will be harder for Hastings to hang on to them. If Hollywood studios perceive Netflix as a has-been, it will be harder for Hastings to negotiate favorable content deals.
Where once Netflix stood alone, it now faces intense competition from Apple, Amazon, Wal-Mart and others.
It’s not that analysts believe Hastings should have remained unchanged at a time when Netflix’s business model was evolving. Netflix’s DVD-by-mail business has a wildly different cost structure than the far cheaper Internet video streaming, which Hastings believes is the company’s future.
Even in the midst of its stumbles, Netflix has plenty of supporters.
“In life we all make mistakes,” said Michael Corty, an analyst at Morningstar. “You hope that your mistakes are small.”
But those less sanguine fear the company could become the AOL of streaming.
“There are literally 10 to 20 things that can go wrong for this company in the next year,” Wible said. “It’s a fundamentally flawed business model. They don’t own content. They don’t own distribution, and they can’t sustain the price point that they’ve established.”
Hasting’s business philosophy has long been rooted in the idea that companies rarely die from moving too fast. They die from moving too slowly.
On Monday, Hastings issued a mea culpa: “There is a difference between moving quickly _ which Netflix has done very well for years _ and moving too fast, which is what we did in this case.”
Will Hastings now face pressure to step down? Analysts doubt it, saying he deserves credit for building Netflix up.
“He’s entitled to have an occasional misstep,” said Michael Pachter, an analyst at Wedbush Securities. “It’s like firing Steve Jobs in 1985. It sounded like a good thing at the time, but it turned out to be a disaster. Reed is the visionary who got them there, and he’s good.”
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