Netflix Exec: Customers Can ‘Vote With Their Checkbooks’

On last month's price hike

Headshot of Emma Bazilian

When Netflix announced its new pricing plan in July—splitting the existing $9.99 a month plan for streaming and DVDs into two separate $7.99 fees—many of the company’s angry customers took to Facebook and Twitter to protest the increased fees and threatened to cancel their subscriptions.

That price hike finally went into effect on September 1, and now those disgruntled subscribers will have to put (or, more fittingly, remove) their money where their mouths are, chief content officer Ted Sarandos said yesterday.

“The supplement you paid didn't cover the cost of DVDs by mail, so we said let customers vote by their checkbook,” Sarandos told an audience at the Paley Center for Media's International Council conference in Beverly Hills. “We gave them an opportunity not to pay for streaming if they don't want it or for DVDs if they don't want it. It was a sexy headline to say there's a 60 percent price increase, but that was only for people who want both.”

Those 25 million subscribers have voted with their checkbooks, and the result isn’t pretty. Yesterday, the company said that customers were getting rid their subscriptions in larger numbers than expected. So far, about a million customers have canceled their subscriptions, resulting in a projected quarterly loss for the company—the second in its history. Netflix stock, which peaked at $304.79 in July, dropped 19 percent in trading on Thursday, closing at $169.25.

Sarandos admitted that the company had underestimated how many customers would react negatively to the price hike, but said that Netflix would be more prepared for changes in the future. “Being able to precisely forecast and predict the behavior of that many people to a fairly radical change is something we'll get better at with time,” he said.

@adweekemma Emma Bazilian is Adweek's features editor.
Publish date: September 16, 2011 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT