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Netflix, the once vaunted DVD rental and streaming service, is imploding on Wall Street. Since July, the company's stock has lost more than two-thirds of its value, much of that just this week.
NPR's Wendy Kaufman explores what went wrong.
WENDY KAUFMAN, BYLINE: By now, you've probably heard the numbers. Netflix lost 800,000 U.S. subscribers in the past three months. It was a stunning reversal for a company that appeared to be doing so well for so long. Over the summer, Netflix raised prices. The package of DVDs by mail and online streaming soared from 10 to $16. Customers were furious and cancelled their subscriptions.
Analyst Dan Rayburn is with the consulting and research firm, Frost and Sullivan.
DAN RAYBURN: I think that they maybe took for granted the fact that people loved Netflix so much and were so loyal to the brand that they can do anything they want.
KAUFMAN: Then, in September, the company made matters worse. Rayburn explains Netflix announced it would split its business in two. Its streaming service would continue to be called Netflix, but a separate company would handle the DVDs.
RAYBURN: You know, Netflix has always come to the market with something that's easy, simple. It's very smart. That's why the service has done well. So, for them to even consider and to think that they're going to roll out two separate services with two separate websites with two separate queues, that's not simple.
KAUFMAN: The backlash to the plan was so intense, Netflix was forced to abandon it. Rich Greenfield, an analyst at BTIG, says the company was looking at data showing that new subscribers were overwhelmingly signing up for streaming only and the use of DVDs by existing customers was falling. That, he says, led Netflix to believe customers didn't value the DVDs all that much. But it turns out that even customers who don't use DVDs seem to like having access to them.
RICH GREENFIELD: I think they misread the data in some ways and that led them to try to accelerate the shift from DVDs to streaming faster than they otherwise should have.
KAUFMAN: Netflix co-founder and CEO, Reed Hastings, probably wouldn't dispute that. The man who graced a cover of Fortune magazine last year now concedes Netflix was overconfident and moved too quickly.
For Netflix, getting back on track may not be easy. Customer good will can be hard to recapture and the company's missteps may have given Amazon.com, which recently launched its own streaming service, a golden opportunity to gain customers at its expense.
Wendy Kaufman, NPR News. Transcript provided by NPR, Copyright NPR.