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Netflix - A pariah built from a messiah

By PETER WHITE

Published: 22 September, 2011

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Some companies are born great, others have greatness thrust upon them, but there are some who achieve greatness and then try their hardest to rid themselves of it. Netflix is taking on the appearance of such a company, having just upset 24 million customers in a matter of days.

At Rethink TV we are having trouble with the complete "about face" that the world has done on Netflix in the past few weeks. Yes it has raised it pricing, yes it has some tricky content renegotiations ahead of it, but does it really deserve the mass desertion by investors, dropping its share value by more than half, almost overnight..

Investors have always been suspicious of Netflix, with good reason. When it was only in Online DVD rentals the margins were low, the churn was high and the cost of gaining new customers was sometimes exorbitant. But this has not been the case for the past 12 months or so, and its numbers have become stronger and stronger.

This week the CEO shot himself in the foot by apologizing to customers for not consulting them more over price rises. But then put his recently shot foot into his mouth by changing the name of the DVD rental business to "Qwikster" and making customers go to a second web site to order DVDs.

This is a company that won the US online DVD rental wars, based on a policy of given customers what they want, whatever the costs - it now looks like it has a new identity, one where it ignore customers and investors alike, and does what the hell it likes. It has, as the saying goes, "managed to snatch defeat from the jaws of victory."

And so Netflix is now widely seen as having failed already, or at least having a number of large obstacles to overcome. (See the rest of this story at www.rethinkresearch.biz)

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