Video & Audio|September 15, 2011| Author: Kim LaCapria|Tags:

Netflix Stock Drops, 1M Subscribers Jump Ship After Rate Hike

netflix stock

Netflix has lost one million of their 25 million subscribers after the controversial price hike instituted on September 1st, and stock prices for the streaming giant have hit a low for 2011.

Following the announcement this summer that prices would be increasing by up to 60% for many of the Netflix subscribers who rent both streaming titles and physical media, subscribers across the web vented at length about the decision and promised to leave the service in droves when the hikes took effect. It seems that the one in 25 did follow through, although it’s plausible that in the long-term, Netflix could save money in streaming rather than shipping physical media- even if it means an initial loss of subscribers.

In a statement today, Netflix acknowledged that the loss of subscriber enthusiasm was an important factor, but stood behind the change, saying:

“We know our decision to split our services has upset many of our subscribers, which we don’t take lightly, but we believe this split will help us make our services better for subscribers and shareholders for years to come.”

Shares for the streaming giant were down 16% in early trading today, and Wedbush Securities analyst Michael Pachter observed:

“The Netflix model is a delicate balance between keeping the price right for the consumer and providing them enough content… Suddenly, the value proposition isn’t that great. The consumer gets less for a higher price.”

Q3 ends September 30th, and it will be interesting to see what the final tally of damage to the company’s stock and subscriber base will be when all is said and done.