Netflix - Reed Hastings

For the record, I love Netflix. It’s the greatest thing that has ever happened to me.

For months I ran away from its lure, trying to avoid the temptation for unlimited TV shows and movies. I knew my life would never be the same, or rather, it would never be again.

Finally after months of lingering jealousy over my friends’ Netflix accounts, I succumbed to the pressure. Within minutes I had upwards of 60 items on my Instant Queue. Within a month, I had watched five seasons of Doctor Who, three Japanese horror films, and maybe five other British television shows. Over a year later, my queue is still going strong at 70 items. I was hooked, I could not stop. My life was over, but I was happy.

This is why it breaks my heart to see the trouble the company has been facing since last year, when it raised prices by as much as 60 percent, sending many users into an unsubscribing frenzy. Nowadays, Netflix’s profits are dropping, and the once innovative company is now one of many in the online streaming market.

On Tuesday, Netflix released their abysmal second-quarter earnings for 2012, which showed a 91 percent drop in net income. This was due in part to rising costs, and a slowing increase of new subscribers, just 420,000 in the US compared to the 1.8 million that Netflix experienced at the same time last year.

While the streaming service gained, its DVD service lost around 850,000 customers, probably made up of people who realized that nobody watches DVDs anymore. I know, it’s quite a shock.

It’s such a shock in fact, that Redbox--that cheap DVD-rental service you see in grocery stores and train stations--is even starting to move away from them. On Tuesday, as Netflix was reported losses, Redbox reported innovation, announcing that they would soon roll out a streaming service. There is no word yet on what exactly the streaming service will include, and how it will differ from Netflix and other competitors such as Amazon Prime, but it creates yet another obstacle for Netflix to overcome.

The company has also been struggling to gain the right to stream newer films on their service. The exclusive deal with Viacom’s pay-TV channel ends at the end of August. So while Netflix was gaining some ground in the new movie market with releases like Thor, many people now might turn to other services for recent films.

“People are moving away from DVD rapidly,” CEO Reed Hastings said in a Tuesday interview.

Netflix was one of the leading driving forces behind Blockbuster’s bankruptcy back in 2010. No more waiting in lines at video rental stores on a Friday night. No more late fees. No more waiting for that one movie to get returned, George Costanza. Best of all, no advertisements for those of us who have been spoiled by the Internet.

The model has always been flawed, and now it is outdated. $8 a month for unlimited streaming is a small price to pay for such a giant service. Companies are asking for more money, and how will Netflix be able to pay them? How will we be able to cover the costs involved if we pay so little a month?

Would we be able to recover if Netflix raises our prices again? We already pay $8, but what if it goes above $10? Will we, as privileged Internet users, just resort to torrents and illegal streams, as we seem to do? There are always ways around these kinds of problems.

Netflix needs to introduce new features, take risks (good ones), and expand on their current template in order to stay relevant.

“We have enormous challenges ahead, and no doubt will have further ups and downs as we pioneer Internet television,” Hastings wrote in a letter accompanying the second-quarter results, in a statement that earns him the name “Captain Obvious.”

Even if you don’t think Netflix is worth it, you might as well subscribe for the fourth season of Arrested Development. Why not? Are you chicken?


I would like to thank the Academy, and my parents for never buying me a gaming console when I was younger.


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