Netflix Inc. (NFLX) Shares Fall on Price Cut
Netflix shares fell Monday, as the company said it was lowering the price on two of its most popular plans by $1 per month.
Effective Monday, Netflix will charge $16.99 a month for the plan that allows subscribers to have three movies out at a time. The new price is a dollar less than a similar plan offered by Dallas-based Blockbuster (NYSE: BBI - News). However, Blockbuster's plan, called Blockbuster Total Access, also allows online subscribers to return DVDs by mail or to the stores, where they can receive a free rental.
Los Gatos, Calif.-based Netflix shares were down nearly 11 percent in Monday morning trading to $17.47.
Maurice McKenzie, an analyst with Signal Hill Group in Baltimore, said the move was necessary in order for Netflix to stay competitive.
"I think that Blockbuster's program is having a measurable impact on Netflix's ability to attract subscribers," he said.
However, McKenzie doesn't believe Netflix's price cut signals a larger price war where customers will see a spiraling down of prices.
Michael Pachter, an analyst with Los Angeles-based Wedbush Morgan Securities, said he expects Netflix, which releases its earnings Monday, to report that it has lost customers for the first time in four or five years, and he said it's because of Total Access.
"Total Access is a better program for the money," Pachter said.
Pachter said Netflix probably lowered its plan thinking that by pricing it $1 cheaper than Blockbuster's plan, people will see the lower price and opt for Netflix.
"I think that Netflix is toast. One dollar is for unlimited immediate gratification," he said, referring to Blockbuster customers being able to also return movies at the stores.
Pachter, who said he and his wife are Blockbuster Total Access subscribers, said he was looking at his three mail order movies last night, and knew he wasn't going to watch two of them.
"Knowing I could go to the stores and swap them was a really good feeling," Pachter said.
Published July 23, 2007 by the Dallas Business Journal
Effective Monday, Netflix will charge $16.99 a month for the plan that allows subscribers to have three movies out at a time. The new price is a dollar less than a similar plan offered by Dallas-based Blockbuster (NYSE: BBI - News). However, Blockbuster's plan, called Blockbuster Total Access, also allows online subscribers to return DVDs by mail or to the stores, where they can receive a free rental.
Los Gatos, Calif.-based Netflix shares were down nearly 11 percent in Monday morning trading to $17.47.
Maurice McKenzie, an analyst with Signal Hill Group in Baltimore, said the move was necessary in order for Netflix to stay competitive.
"I think that Blockbuster's program is having a measurable impact on Netflix's ability to attract subscribers," he said.
However, McKenzie doesn't believe Netflix's price cut signals a larger price war where customers will see a spiraling down of prices.
Michael Pachter, an analyst with Los Angeles-based Wedbush Morgan Securities, said he expects Netflix, which releases its earnings Monday, to report that it has lost customers for the first time in four or five years, and he said it's because of Total Access.
"Total Access is a better program for the money," Pachter said.
Pachter said Netflix probably lowered its plan thinking that by pricing it $1 cheaper than Blockbuster's plan, people will see the lower price and opt for Netflix.
"I think that Netflix is toast. One dollar is for unlimited immediate gratification," he said, referring to Blockbuster customers being able to also return movies at the stores.
Pachter, who said he and his wife are Blockbuster Total Access subscribers, said he was looking at his three mail order movies last night, and knew he wasn't going to watch two of them.
"Knowing I could go to the stores and swap them was a really good feeling," Pachter said.
Published July 23, 2007 by the Dallas Business Journal
Labels: Netflix Inc., NFLX
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