As of November, Netflix’s shares closed at $64.92, a gaping fall from a high of $304.79 in July. The jaw-dropping descent of the popular American DVD-rental and online video streaming service, is attributed to a number of egregious errors committed by the company this year.

With 24.59 million members in the United States and Canada, Netflix is an Internet subscription service for enjoying movies and TV shows online. It also offers a DVD rental service for an additional $2 on top of its basic online streaming plan for $7.99.

According to Tech Crunch, Netflix CEO, Reed Hastings, said in May that, “Streaming is the core of our business and it is growing rapidly. Streaming is much bigger than DVD for us in terms of hours of viewing, growth, and focus. We are seeing massive consumer adoption of streaming.”

To capitalise on its streaming business, Netflix introduced a new pricing system in July which separated the two services, with the streaming plan costing $7.99 and the DVD plan also at $7.99. Selecting both options would cost $16, effectively raising the subscription price by 60% for subscribers.

The announcement, however, was met with an unforeseeable backlash as more than 800, 000 irate subscribers defected in protest of the ludicrous price-hike. In attempt to appease customers, Hastings then announced a scheme to spin-off 2 companies for Netflix’s DVD-by-mail rental and on-line streaming services. However, the announcement was promptly retracted when violent objections arose from all sides.

For a company that began its meteoric rise with effortless access to video entertainment, the move was perceived by many as complicating the rental process.Since then, stock prices have continued to careen.

Last week, the company took steps toward raising $400 million from investors to shore up its balance sheet, selling $200 million of common stock to T. Rowe Price funds, and placing $200 million of convertible debt with the investment fund Technology Crossover Ventures. The purpose of raising capital is to finance Netflix’s expansion plans into the UK and Ireland in the first quarter of 2012.

While financially logical, investors saw the move as underlying the foolishness of the company’s stock repurchases earlier in the year at much higher prices, reports Forbes.

With escalating costs in content investment, Netflix has warned that it expects to lose money in 2012. High-cost ventures into UK and Ireland are also likely to cause the company to incur losses on a global basis in the upcoming year. Barron’s reported on Saturday, November 26th, that it looks as if the company will end up making $4.08 this year and might, at best, make a profit of 75 cents in 2012.

In their letter to shareholders dated October 24, 2011, Hastings and CFO, David Wells, defended their new pricing strategy. “We think that the $7.99 for unlimited streaming and $7.99 for DVD are both very aggressively low prices, relative to competition and to the value of the services, and they are right place for Netflix to be in the long term. What we misjudged was how quickly to move there. We compounded the problem with the lack of explanation about the rising cost of expansion of streaming content, and steady DVD costs, so that absent that explanation, many perceived us as greedy,” Wells said.

In the midst of the immediate bleak outlook, however, there is a silver lining. For one, Hastings is right in that the future of video-watching will be digital.

This has significant financial implications for Netflix. Getting rid of the DVD-by-mail business would allow Netflix to eliminate an array of costs associated with infrastructure and focus instead on investing in content. Moreover, with the amount of money that Netflix has invested in acquiring content, the current valuation makes Netflix an attractive acquisition for competitors such as Amazon and Google.

Netflix remains positive that it will bounce back into a profit-reaping cycle, and is planning to recuperate from domestic losses after launching in the UK and Ireland.

The article Bleak Year Ahead for Netflix appeared first on The Toonari Post - News, Powered by the People!.

Netflix announced it was planning to split its DVD/Blu-Ray rent by mail and online streaming services back in early September. The mail delivery service was branded as Qwikster and video games would be made available for rent as well. Since then the plan was called off and entry into the video game rental market was put on hold as many customers opposed the split.

Subscribers did not like the idea of having to visit a different website and mange a second account to rent movies or video games. Netflix’s stock price has been steadily dropping since the 60% price hike in July and loss of 800,000 subscribers in the last quarter despite the firm’s profits.

Shareholders were also not happy as Netflix would have to spend millions to launch Qwikster when consumers have already established Netflix as a rent by mail service under the Netflix brand. With Netflix’s missteps that leaves one begging the question, is there a legitimate alternative to Netflix?

Angry Netflix users have been on the lookout for something new and there might just be a replacement depending on their viewing habits. Online streaming services like iTunes and VUDU have no monthly fee but the bill will quickly add up from just a few purchases as each rental will cost around $0.99 to $5.99 depending on what it is.

The content per dollar ratio is probably not what Netflix users are looking for. Amazon Prime Instant video and Hulu Plus are much more viable alternatives as they allow unlimited streaming for a monthly fee.

Amazon Prime has the smallest selection but also has the lowest price at $79 a year, and offered a discounted price for college students that subscribed earlier this year, but Amazon has not stated if it will offer that deal year after year. Amazon Prime also has content for rental much like VUDU and iTunes.

Hulu concentrates more on what is current on television offering a free option that allows users to see five episodes of a show’s current season, movies, and in standard definition. Hulu Plus gives access to full seasons, a better selection of movies, and in high definition for $7.99 a month. Hulu uploads episodes a day after it airs on television giving it an edge over Netflix’s usual 28 day wait.

There really is no widely accepted alternative to Netflix at the moment. For $7.99 a month Netflix offers the biggest online streaming selection in movies and television. Hulu Plus is definitely better than Netflix for television fans but it is the other way around for movie buffs.

As much as people argue which is better to have Hulu Plus or Netflix (even though they have some of the same content available) at the moment they should be considered compliments and not substitutes of each other.

The article Is There an Alternative to Netflix? appeared first on The Toonari Post - News, Powered by the People!.