Netflix soars as Blockbuster plans bankruptcy

[Dos Equis]

 

Netflix loses 800,000 subscribers
By Julianne Pepitone @CNNMoneyTech October 24, 2011

NEW YORK (CNNMoney) -- For Netflix, the hits keep on coming -- the bad kind.

The latest thwack: Netflix lost 800,000 U.S. subscribers in the quarter that just ended, which was littered with PR nightmares including a price hike and the Qwikster debacle. It was the first time in years that Netflix's U.S. customer base shrank instead of growing.

Netflix spoke bluntly about the recent problems in its third-quarter earnings letter, released late Monday.

"The last few months...have been difficult for shareholders, employees, and most unfortunately, many members of Netflix," Netflix CEO Reed Hastings wrote in a letter to shareholders. "We've hurt our hard-earned reputation, and stalled our domestic growth."

Netflix said it was focusing on the future, promising customers that "we are done with pricing changes." But it doesn't think the subscriber hemorrhaging is at an end.

Netflix had 23.8 million total U.S. subscribers as of Sept. 30, down from 24.6 million three months earlier. Around 21.5 million customers had streaming subscriptions, and just under 14 million had DVD subscriptions, with most customers mixing the two.

By the end of the ongoing quarter, which wraps up Dec. 31, Netflix expects those numbers to drop further. It forecast that it will have 20 million to 21.5 million streaming customers and up to 11.3 million DVD subscribers in the U.S.

Netflix shares plunged 27% in after-hours trading, though the company reported earnings that beat analysts' expectations. Netflix earned $62 million, or $1.16 a share, on a record $822 million in revenue.

The company also warned shareholders that it will be unprofitable in coming quarters.

Netflix said earlier on Monday that it will expand its streaming video service into the United Kingdom and Ireland. In its earnings letter later in the day, Netflix said that expansion will make the company's overall business unprofitable "for a few quarters" starting at the beginning of 2012.

Netflix said it will hit pause on its international expansion after its U.K. and Ireland launches "until we return to global profitability."

Netflix ended the quarter with $366 million in cash on hand, down from $376 million at the end of its previous quarter.

A nightmarish third quarter: Netflix's (NFLX) quarter started off badly in July, when the company angered many subscribers by saying it would begin charging separate prices for its DVDs-by-mail and streaming video plans. That amounted to a big price hike for Netflix customers, as the cheapest-possible bill for customers who want both services jumped from $10 to $16 a month.

Enraged customers flooded Netflix's site with tens of thousands of comments, as well as a barrage of tweets under the hashtag #DearNetflix.

Netflix acknowledged the anger in its release Monday, saying, "We compounded the problem with our lack of explanation about the rising cost of the expansion of streaming content ... [so] many perceived us as greedy."

One analyst predicts that Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012.

"Our primary issue is many of our long-term members felt shocked by the pricing changes, and more of them have expressed that by canceling Netflix than we expected," Netflix wrote.

As a result of the price hike anger, on September 15 Netflix was forced to cut its U.S. third-quarter subscriber estimates by 1 million customers, or about 4%, to 24 million. Shares plunged 19% that day.

But the real debacle came just three days later, on September 18. Netflix CEO Hastings announced that the company's movies-by-mail service would be rebranded as Qwikster, while the Netflix brand would be dedicated to streaming video.

Still smarting from the price hike, customers were incensed. They raged against the idea of managing two separate accounts -- so much so that Netflix pulled a stunning reversal a few short weeks later and canceled the Qwikster plan.

"Consumers value the simplicity Netflix has always offered and we respect that," Hastings said on October 10. "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."

Many pundits and customers were shocked by the flip-flop, which led some to wonder about the company's long-term vision.

And so Netflix has begun its fiscal fourth quarter under a dark cloud.

Streaming catalog woes: Meanwhile, Netflix is struggling to build and maintain a robust streaming catalog. In September, pay-cable network Starz ended contract renewal negotiations with Netflix and announced it will pull its movies and TV shows from Netflix early next year, yanking away one of Netflix's key sources of relatively recent movies.

Studios are demanding more money for their valuable content, and now they have a bargaining chip in the form of Netflix's competitors. Beyond direct rivals like Hulu and kiosk service Redbox (owned by Coinstar (CSTR)), big tech players like Amazon (AMZN, Fortune 500) and Google (GOOG, Fortune 500) are jumping into the streaming game.

http://money.cnn.com/2011/10/24/technology/netflix_earnings/index.htm?hpt=hp_t1

[tu_holmes]

I am copying that link to the E-Board... Bay has a thing over there about Netflix.

[Purge_WTF]

  I've worked for them for ten years now, so I'd like to think that I'd be one of the last to go if it really hit the fan. We just let 2 people go a couple of weeks ago. We're still wondering how our CEO could've made such a foolish move by splitting the two services and jacking the price for both.

[sync pulse]

What is going to happen to streaming if internet service providers start to meter?

[Dos Equis]

Trouble . . . .

Netflix stock sinks 35% as subscribers flee
 By Julianne Pepitone and Jessica Dickler @CNNMoneyTech October 25, 2011
Click the chart for more on Netflix stock.

NEW YORK (CNNMoney) -- The Netflix nightmare continues. Shares plunged 35% in afternoon trading Tuesday after the video service revealed it lost 800,000 subscribers in its difficult third quarter.

Netflix (NFLX) earned $62 million, or $1.16 a share, on a record $822 million in revenue in the quarter that just ended, beating analysts' estimates. But shareholders focused on the sharp decline in subscribers and high costs for international expansion.

Analysts promptly downgraded the stock Tuesday morning, with one calling the report a "nuclear winter scenario." Shares were trading near $78 on Tuesday, after nearly topping $300 in mid-July.

Shares started the year around $180 and rallied in the spring thanks to a growing subscriber base. But Netflix kicked off last quarter on a sour note by announcing it would begin charging separate prices for its DVDs-by-mail and streaming video plans, resulting in a big price hike for Netflix customers.

As a result, for the first time in years, Netflix's U.S. customer base shrank. Netflix had 23.8 million total U.S. subscribers as of Sept. 30, down from 24.6 million three months earlier.

By the end of the ongoing quarter, which wraps up Dec. 31, Netflix said it expects to lose even more subscribers. It forecast that it will have 20 million to 21.5 million streaming customers and up to 11.3 million DVD subscribers in the U.S.

Perhaps even more concerning: Netflix's streaming video service expansion into the United Kingdom and Ireland, announced earlier on Monday, will make the company's overall business unprofitable "for a few quarters" starting at the beginning of 2012.

0:00 / 1:14 Netflix bleeds subscribers
Downgrades pour in: The dour report led JP Morgan analyst Doug Anmuth to downgrade Netflix shares on Tuesday to "neutral" from "overweight."

"The long-term potential for streaming-only in the U.S. and international markets remains intact," Anmuth wrote in a note to clients. "[But] start-up costs in Latin America and UK/Ireland are likely to come in much higher than we anticipated."

Anmuth also expressed concern about rising content licensing costs. He lowered his price target on Netflix to $67 a share, a steep drop from his previous target of $205.

Susquehanna Financial was even more bearish in its note, which was titled "The End of the Road." Analyst Vasily Karasyov cut Netflix to "negative" from "neutral," citing both the subscriber decline and the international costs.

"Looks like the nuclear winter scenario is playing out for NFLX," Karasyov wrote. He cut his price target to $60 from $124.

Citigroup's Mark Mahaney cut shares to "neutral" from "buy" late Monday night, calling Netflix's situation "a major reset."

Mahaney had upgraded Netflix to "buy" in May, but he admitted in his note Monday that "our call has been drastically wrong."

http://money.cnn.com/2011/10/25/technology/netflix_stock/?npt=NP1&hpt=hp_t2

[Dos Equis]

Can Netflix pull a rabbit out of its hat?
By Paul R. La Monica @lamonicabuzzApril 20, 2012

NEW YORK (CNNMoney) -- Netflix's stock has bounced back sharply from last year's nightmare. But it may take some of Gob Bluth's best illusions (don't you dare call them tricks!) for the company to be profitable again anytime soon.

Will Arnett's magician and the rest of the cast from the cult sitcom "Arrested Development" are returning for a fourth season that Netflix will stream next year. (Fox canceled the show in 2006.)


But while "Arrested Development" was (and hopefully still is) pure satirical genius, there's little for Netflix shareholders to laugh about right now. On Monday, the company is set to report quarterly results that are likely to be grim.

Netflix (NFLX) shares have surged more than 50% this year, but they are still 65% below their all-time high from last July. Netflix, which had been a Wall Street favorite due to its stellar track record for growth, stumbled hard last year.

How bad was 2011? Where to begin?

A huge price hike for people subscribing to both Netflix's DVD and streaming business led to an exodus of customers. Netflix then had an embarrassing public relations debacle when it said it would rename its DVD business Qwikster and separate it from the more lucrative streaming business. The company backtracked a few weeks later on the Qwikster rebranding.

Meanwhile, investors grew increasingly nervous about how expensive it will be for Netflix to reach new agreements with big media companies. Netflix also was unable to renew its contract with Starz, a key content supplier. The Liberty Media (LMCA)-owned cable company has a large chunk of Walt Disney (DIS, Fortune 500) movies that are now no longer in Netflix's catalog.

More on Netflix: Why its Facebook app would be illegal

Adding insult to injury, heavy investments in international operations are going to take a huge bite out of earnings for all of this year.

In fact, Netflix is expected to report a loss of 27 cents per share in the first quarter. Analysts are forecasting sales growth of 21% to $868.6 million. While that level of revenue growth is still pretty impressive, it's well below Netflix's average annual revenue growth rate of 32% for the past three years. What's more, sales are expected to only be up 14% for the full year..

The good news is that Netflix reported in January that it did add back some subscribers in the fourth quarter following the defections in the third quarter. But for Netflix to keep rallying, it's going to have to show investors that it can rejuvenate its growth prospects.

That growth could come at the continued expense of earnings.

"Investors appear focused solely on subs growth, which will likely require elevated advertising spending. We expect management to chase subscriber growth at all costs, driving marketing spending ever higher," Michael Pachter, an analyst with Wedbush Securities in Los Angeles, said in a report previewing Netflix's first-quarter results.

In the interest of fairness, I think Netflix CEO Reed Hastings has done an admirable job of owning up to the numerous mishaps last year. Heck, I'm a Netflix customer.

But the company still faces challenges that are hard to overlook.

The move into content may make sense. Netflix also has an original series called "Lilyhammer" starring Steve Van Zandt of "The Sopranos" and Bruce Springsteen fame as a mobster in Norway, as well as the upcoming "House of Cards" with Kevin Spacey to go along with "Arrested Development."

But it's an open question whether original programming will bring back disgruntled Netflix customers. Netflix is not, by any stretch, the only streaming video game in town. And that's true in both the U.S. and the rest of the world.

Hulu, owned by media firms Disney, News Corp. (NWSA, Fortune 500), Comcast's (CMCSA, Fortune 500) NBCUniversal and private equity firm Providence Equity Partners, is also aggressively trying to grab consumers. Hulu even has commercials featuring Arnett. Coinstar's (CSTR) Redbox is boosting its streaming presence. Internationally, Amazon (AMZN, Fortune 500) is a major competitor thanks to its Lovefilm service.

11 streaming services that want to take Netflix's crown

So Netflix faces the delicate dance of wooing back angry U.S. customers while also trying to bulk up abroad.

"The company has staying power, but how much has Netflix bounced back from shooting their toes off in the U.S.? And how aggressive will they be in going after the rest of the world?" wondered Steve Frankel, an analyst with Dougherty & Company in Boston.

Frankel said it's hard to get a sense for how profitable Netflix can be until we know when it plans to "let its foot off the accelerator on international marketing."

If Netflix were a cheap stock, this may not be that big of a concern. But now that Netflix has rallied hard this year, you have to wonder if the easy money has already been made.

"I think Netflix is going to stay around the $100 a share range for the foreseeable future. There is not a whole lot to more to get excited about just yet," said Arvind Bhatia, an analyst with Sterne Agee in Dallas.

It's a similar story to Bank of America (BAC, Fortune 500), the Dow's best performer this year, in a sense. We know that the worst is probably over after an awful 2011. But will there be enough improvement in the near term to justify a much higher stock price?

Netflix trades at 45 times 2013 earnings projections. And the disparity between forecasts is extremely wide, with an estimate of $1.01 a share on the low end and $3.98 a share on the high end. There is just too much uncertainty. Even a Netflix bull concedes as such.

"The stock is likely to be extremely volatile because everything is based on perceptions of profitability several years down the line, which can change significantly," said Andy Hargreaves, an analyst with Pacific Crest Securities in Portland who recommends the stock.

In other words, Netflix might be almost as risky as investing in the Bluth's real estate firm from "Arrested Development."

Best of StockTwits and reader comment of the week: Great numbers from Microsoft (MSFT, Fortune 500) and eBay (EBAY, Fortune 500) have one reader doing the time warp again. McDonald's (MCD, Fortune 500) longs are lovin' it. And Under Armour (UA) isn't just for football players. "We must protect this tweet!"

chrisspinell: $MSFT and $EBAY both doing well? We must have traveled back to the mid-late 90's.

Too funny. I tweeted something similar at the end of Thursday, but alluded to even an earlier part of the 1990s. I noted how Microsoft has momentum and investors are suddenly nervous about Apple (AAPL, Fortune 500). Reminded me of 1993. Where's my Newton?

baumusc: $MCD Thanks for pulling through. Their business actually goes up in economic hard times.

Good point. But not all fast food companies are stodgy value stocks. I discussed the strong performance of Mickey D's, as well as KFC owner Yum! Brands (YUM, Fortune 500) and Chipotle (CMG), the unofiicial CNNMoney restaurant of choice, in today's Buzz video.

cyim: $UA finally breaks $100! woot! largely attributable to women's sales line sell-through. will they start to encroach on$LULU's territory?

Very interesting. Lululemon (LULU) has remained the top downward dog in yoga apparel. But you have to think that Under Armour, not to mention Nike (NKE, Fortune 500), wants to make a bigger splash in this market.

I did a Buzz video earlier this week about the amazing run of medical robot company Intuitive Surgical (ISRG), which keeps reporting solid earnings. One reader cashed in on the stock a little early. And isn't happy about it.

"had $ISRG at $100 sold for $250 to fund a new lawn for overpriced house. Thanks again Ben. #grassyoucantsmoke #housingvictim," tweeted DepletedO2 (It rhymes!)

Sorry about the house. And that you sold at $250 considering ISRG is now near $580. But remember, the housing bubble isn't the Fed's fault. None other than Ben Bernanke has said so! And by the way, the fact that I chose a tweet referring to "grass" as top of the week on 4/20 is purely coincidental.

http://money.cnn.com/2012/04/20/markets/thebuzz/index.htm?iid=EL

[Purge_WTF]

NFLX - Netflix, Inc.
87.68-14.16(-13.9%)at 20:00 UTC Apr 24
88.25+0.57(0.65%)After Hours
Open: 86.50High: 90.00Low: 86.30
Quote delay: 15 min - Nasdaq, 20 min - NYSE and Amex

 

[Dos Equis]

Down to five stores in Hawaii?     They are done.

Store’s profitability is less than blockbuster, to close
October 24, 2012
By MELISSA TANJI - Staff Writer (mtanji@mauinews.com) , The Maui News
 
KAHULUI - Blockbuster Video in Kahului is apparently the latest victim in a series of planned companywide closures that was announced earlier this year.

Blockbuster spokeswoman Sara Blue said in an email Tuesday afternoon that the last day of business for the Kahului store will be Nov. 11, although a worker indicated the store will close by Nov. 8 or earlier if merchandise sells out.

Blue did not say how many employees worked at the Kahului store but said, "The employees will be offered a position at the other store based off of their desire to relocate and if we have positions open."

The Kahului Blockbuster Video store will close by Nov. 11, or earlier if merchandise sells out. The store is no longer renting movies and video games and is currently in liquidation. The closure is apparently part of a companywide move announced this year to close those that are not performing well.

Wailuku resident Jemah Lung-Gat finds the movie “Hitch” on sale at Blockbuster Video in Kahului. The Wailuku resident knew about the pending closure and wanted to find some deals and DVDs.
The Maui News / MELISSA TANJI photo

She indicated that the Kihei store is still open. She added that Blockbuster evaluates the profitability of each location, so some stores close when leases are up. On Oahu, the Kailua store will close on Nov. 18, Blue said.

Five Blockbuster stores will remain open in Hawaii, according to Blue.

"Blockbuster is evolving with customer needs," she added.

The Kahului store is more than a decade old and was once a place many people frequented on weekends. Now, the store is in liquidation and is no longer renting movies and games, signs indicated.

Large "store closing" signs hung on the windows, and inside the store DVDs and video games were marked down 10 to 30 percent, with prices hovering around $3.99 and higher according to signs. Some store fixtures were for sale.

Paia resident Mary Cochran was surprised to see the store's closing signs when she and her husband came to rent DVDs Tuesday morning.

But she said she understood that the days of DVD store rentals have passed and called the closure the "sign of the times . . . everything is online."

But Cochran said she preferred to go to a store where she could physically peruse the aisles and titles.

"I rather come here," she said.

Wailuku resident Jemah Lung-Gat showed up at the store already aware of the closure.

She said she came to check out the sale and find the movie "Hitch" on DVD, which she found.

Lung-Gat said she wasn't a patron of Blockbuster and instead turned to the online/kiosk Redbox rentals that can be found at various stores.

Earlier this year, the Dish Network Corp, which acquired the Blockbuster video-store chain last year, said in an annual filing with the Securities and Exchange Commission that it plans to close more than 500 Blockbuster stores this year.

The closures would leave Blockbuster with about 1,000 retail stores.

A spokesperson earlier this year said the stores that will be closed are those that are not performing well.

Dish Network bought Blockbuster out of bankruptcy court for $234 million in 2011.

Blockbuster had filed for bankruptcy when it couldn't counter the threat posed by Netflix, whose DVD-by-mail service and expansion into the Internet video streaming revolutionized home entertainment.

The Kahului store hours are from 11 a.m. to about 7 p.m. weekdays, a worker said. Weekend hours vary, he added.

http://www.mauinews.com/page/content.detail/id/566269/Store-s-profitability-is-less-than-blockbuster--to-close.html?nav=10

[240 is Back]

they can't take another 4 years of obama.

[Hugo Chavez]

  lol at BB's "they are done"  They were already done.  Dish bought blockbuster to use like a netflix service, not shocking they would be closing stores that only serve as very expensive drop off boxes to Dish.

[tu_holmes]

lol at BB's "they are done"  They were already done.  Dish bought blockbuster to use like a netflix service, not shocking they would be closing stores that only serve as very expensive drop off boxes to Dish.

[magikusar]

shoulda shorted this bs artist pig

[Hugo Chavez]

fairly typical of his posts lol...  clearly he didn't even finish reading the article he posted.

[Hugo Chavez]

I don't even get why this thread is on political.

[Dos Equis]

I'm sure Purge will like this.   

Netflix shares surge as Icahn takes 10% stake
By Stacy Cowley and Julianne Pepitone
@CNNMoneyTech October 31, 2012

NEW YORK (CNNMoney) -- Netflix's stock surged Wednesday afternoon as billionaire investor Carl Icahn revealed that his funds have acquired a 10% stake in the streaming media and rentals business.

Netflix (NFLX) shares tripped two circuit breakers in their rapid rise, triggering a temporary halt in the stock. When shares resumed trading, they cooled off slightly but still finished the day up around 14%.

Icahn said in a regulatory filing that his funds have directly acquired or taken out options on 5.5 million shares -- and he's got some ideas about how Netflix (NFLX) can lift its stock's value.

Icahn, a famed activist shareholder, thinks Netflix has "significant strategic value" for "a variety of significantly larger companies that are engaging in more direct competition with one another due to the evolution of the internet, mobile, and traditional industry."

Translation: He thinks someone like Microsoft (MSFT, Fortune 500), Amazon (AMZN, Fortune 500), Verizon (VZ, Fortune 500) or Comcast (CMCSA) -- all of which are building their own streaming video services -- should buy Netflix instead, and he's ready to do some dealmaking.

Icahn amassed most of his stake through "call options," which confer the right but not the obligation to buy shares at a certain price.  It's a way for investors to place a bet on stocks they believe will rise. He has until September 2014 to exercise the option, for which he shelled out $169 million.   

Icahn is famous for pushing his agenda for change at the companies in which he invests.

It's no stretch for him to argue that Netflix needs shaking up. Just last week, Netflix shares plunged 16% on a third-quarter earnings report full of bad news: The company offered weak guidance for the current quarter, and reported figures for new streaming subscriptions that fell well short of expectations.

Over the first three quarters of 2012, Netflix added just 3.4 million new U.S. streaming subscribers, far short of its previously announced goal of signing up 7 million new U.S. subscribers this year. CEO Reed Hastings recently called the projection "a forecasting error," and said a target of 5 million was more realistic.

Meanwhile, studios are demanding a lot more cash for the streaming content they're providing to Netflix, while subscriptions to the company's DVD service are declining.

Netflix's rivals, which include Hulu and an upcoming Verizon-Redbox (owned by Coinstar (CSTR)) partnership, are making headway into the super-hot streaming video space. Many of them are tech or media titans that have other revenue streams to finance their growth and content acquisition costs. Netflix, on the other hand, is dependent solely on its core product.

It's a long list of obstacles, and investors don't seem convinced Netflix can navigate them. Before Wednesday's runup, Netflix shares were close to flat year-to-date. 

http://money.cnn.com/2012/10/31/technology/netflix-icahn/

[Dos Equis]

Old story, but just ran across this. 

Blockbuster Closing All Of Its Remaining Retail Stores
Posted: 11/06/2013

Blockbuster plans to end all domestic retail activity, as well as its by-mail movie distribution, by early 2014, the home movie provider's parent company, DISH Network, announced Wednesday in a press release.

In the release, DISH Network also announced that while company will close all of "its approximately 300 remaining U.S.-based [and company-owned] retail stores," franchised and licensed stores will remain open. From the announcement:

DISH Network Corporation DISH -0.90% today announced that its subsidiary, Blockbuster L.L.C., will end its retail and by mail DVD distribution operations by early-January 2014. The company will close its approximately 300 remaining U.S.-based retail stores, as well as its distribution centers.

"This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment," said Joseph P. Clayton, DISH president and chief executive officer. "Despite our closing of the physical distribution elements of the business, we continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings."

The Blockbuster By Mail service will end mid-December and will serve existing customers until that time.
Reuters reports:

Dish plans to lay off as many as 2,800 employees.

Dish, the second-largest U.S. satellite TV company, bought the failed Blockbuster LLC video rental chain in a bankruptcy auction in 2011 for $320 million, a dramatic fall for a brand that at its peak in 2002 had a market value of $5 billion.

Dish had initially planned to keep 1,500 stores open and retain 15,000 employees, or about 90 percent of the outlets at the time after its acquisition. It has been gradually shutting stores and laying off employees.

"This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment," said Dish's Chief Executive Joe Clayton in a statement.

Online retailers like Amazon.com Inc and online sites such as Apple Inc's iTunes and Netflix have eaten away at Blockbuster's business model for years. Blockbuster was founded in 1985 when video cassette recorders were becoming a fixture in U.S. homes.

Dish has tried to tap the Blockbuster brand by unveiling a new Internet streaming service and a program to rent DVDs by mail, in a bid to challenge Netflix. Dish said will end the DVD by mail service but keep its streaming service "Blockbuster @Home" running.

Dish said it still sees value in the brand for its digital offerings.

When Blockbuster filed for bankruptcy in 2010, it originally proposed to emerge under the control of a group of investors that included activist Investor Carl Icahn and several hedge funds. However, those investors never agreed on a business plan and after poor holiday sales Blockbuster was put up for sale in 2011.
Icahn had wrote in a letter to the Harvard Business Review in 2011 that Blockbuster was the "worst investment I ever made."

http://www.huffingtonpost.com/2013/11/06/blockbuster-closing_n_4226735.html

[Purge_WTF]

 I still don't regret dumping my shares when I did. It allowed me a whole new lease on life.