Infographic: Why Netflix Has Crashed 50% in 2 Months

The past couple of months haven't been kind to Netflix (Nasdaq: NFLX  ) . Not only are consumers outraged over rate hikes and a plan to split the service, but competition is heating up. Amazon (Nasdaq: AMZN  ) is aggressively pitching its own streaming service, and cash-rich Internet giants Yahoo! (Nasdaq: YHOO  ) and Google (Nasdaq: GOOG  ) are reportedly among the companies most interested in buying key competitor Hulu.

To keep track of all the threats facing Netflix -- and the companies that might stand to gain if it falters -- we've created this handy infographic tracking the stock's slide over the past two months.

To keep tabs on all the news surrounding online video, make sure to add the above companies to our new free My Watchlist service. It'll send you updated news and analysis on all your favorite companies. 

Eric Bleeker owns shares of no companies listed above while Dari FitzGerald owns shares of Amazon. The Motley Fool owns shares of Yahoo! and Google. Motley Fool newsletter services have recommended buying shares of Amazon.com, Coinstar, Yahoo!, Google, and Netflix. Motley Fool newsletter services have recommended creating a bear put spread position in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (20) | Recommend This Article (41)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 20, 2011, at 12:50 PM, Threedollarbill wrote:

    I wish I could buy Qwickster. I turn it back into the company it once was. What's hard to understand about that business model--everyone was pretty happy & if it ain't broke, don't fix it.

  • Report this Comment On September 20, 2011, at 1:59 PM, ThomasAlan wrote:

    Great graphic, one small nit to pick. Stars announced it would not be renewing it's contract with Netflix, not the other way around. Small, but important difference.

  • Report this Comment On September 20, 2011, at 2:09 PM, TMFRhino wrote:

    Thanks Thomas,

    Good point.... Could re-word that. Thanks for the kudos!

    Best,

    Eric

  • Report this Comment On September 20, 2011, at 2:19 PM, TMFdfitz wrote:

    Good catch Thomas!

    I've changed the graphic to reflect that important point - if you refresh, all will be right with the world.

    Fool On!

    Dari

  • Report this Comment On September 20, 2011, at 4:50 PM, RealMainah wrote:

    Streaming works great if you have a super duper broadband service but it's not as good as blu ray. I have good service but it's not great. I don't get great streaming, the US needs to upgrade it's broadband all around. Still haven't decided what to do. I could deal with the increase in cost but two different websites will be a pain. I like the Netflix interface, I don't like the Hulu interface, I tried it and dropped it. Call me stupid, but I'm holding on to my netflix stock.

  • Report this Comment On September 20, 2011, at 5:08 PM, memoandstitch wrote:

    Has anyone coined the term reverse-multibagger?

  • Report this Comment On September 20, 2011, at 5:58 PM, xetn wrote:

    For me, the simple explanation regarding NFLX's huge drops is because they decided not to listen to their customer. The, instead decided to dictate terms to them.

    This is a perfect example of the power of the consumer voting with their dollars.

    I have a couple of friends that had already left when the pricing model changed. Now all of the people I know have cancelled.

    Maybe over a period of time, some may go back. i won't.

  • Report this Comment On September 20, 2011, at 6:20 PM, Okiehound wrote:

    I sold at the open yesterday...knowing the pain that was going to inflict anyone who held on. I see no near term reason for the stock to have upside. One month from now you will start seeing the impact this inane decision to split the company is going to have on subscriber numbers. It could be really ugly. I and everyone in my extended family were customers. All of us are downgrading our subscriptions. How surprised will NFLX be to discover half of their customers value access to the huge DVD catalog more than streaming? Tying that catalog into a streaming offering that filled in gaps in streaming availability made customers extremely happy. Taking it away makes us extremely mad and NFLX punishment has just begun. It was not NFLX that killed Blockbuster, it was us customers leaving Blockbuster for a service we came to love. The love is gone.

  • Report this Comment On September 20, 2011, at 7:47 PM, panzzer wrote:

    I fail to understand why Tom and David Gardner of MotleyFool still ask their followers to BUY netflix NOW and keep it as a core stock. Mmm it fell almost 50%, and the customer-sentiment does not look promising at all, plus their are sharks - rather, KILLER WHALES in the water that are set to attack netflix's market share and negotiate with the likes of Starz.

    Gardners, what's wrong? Even your own bloggers are raising a red flag here. Do I need to cancel my subscription?

  • Report this Comment On September 20, 2011, at 9:41 PM, patdon wrote:

    Agree with panzzer. When will hear a comment from Tom or David?

  • Report this Comment On September 21, 2011, at 12:57 PM, TMFRhino wrote:

    Panzzer/Patdon,

    If you're a member David has responded on the NFLX board why he likes the company and still thinks its a buy:

    http://boards.fool.com/1081/my-jack-bauer-analogy-29554528.a...

    http://boards.fool.com/1081/yes-netflix-is-one-of-my-5-bbns-...

    The company is built on healthy disagreement and we've never asked anyone to "toe the company line." We think that offers better discussion, and as the reader, you can decide whose argument you agree with more.

    The reason I worked with Dari on this infographic was because I thought it'd be a nice visual way to explain to investors events surrounding Netflix across the summer illustrated against its decline. I don't have any particular bullish/bearish view on the stock, just wanted to get all the information compiled in a medium that's easy for investors to digest.

    Foolish best,

    Eric

  • Report this Comment On September 21, 2011, at 3:13 PM, ss06470 wrote:

    I don't think the price increase was unfair at all, just not implemented wisely. I've been getting Netflix for 8 or nine years and paying what I am now paying for DVD's only. Streaming was a recent freebe but it should have not been free. To introduce people to the feature (and claim market dominance) they should have offered current DVD members free streaming for a year or 6 months with the understanding that it is a separate service and customers, after being introduced to it through their Dvd plan, will eventually have to pay. They should still do it for new DVD signups. All this carping about Netflix as a ripoff reminds me of people who have been used to free music and resent companies who try to figure out how to make them pay. Netflix needed the revenue to buy content, not because they are gouging their loyal customers

  • Report this Comment On September 22, 2011, at 10:40 PM, thidmark wrote:

    I can't think of anything I'd suddenly pay 60 percent more for without being extremely miffed.

  • Report this Comment On September 23, 2011, at 11:51 AM, ceallachqn wrote:

    I wasn't happy about the price hike and even less pleased with the split. The name, Quikster, is very unappealing. It doesn't define anything about what kind of product is behind it. Fastflix or even Quikflix sounds alot better and at least lets you know you are getting a movie. I am not sure that the split was really well thought out. This just lends itself to overall market appeal to me.

  • Report this Comment On September 23, 2011, at 1:05 PM, bsport8 wrote:

    I live in Canada & therefore netflix just came here around 8 months or so ago.

    But when they came to Canada,they did not offer the DVD's in the mail-only streaming.

    I tried the free 1 month trial and cancelled.The selection of movies offered was terrible.

    I just pay my cable provider $10.00 a month instead for 6 High Definition "movie channels".

    Like everyone else I enjoy watching a movie on a DVD instead of low quality streaming.

    If you shop around you can find better deals from your cable provider for movies instead of the streaming.

    I have a PVR and record all my movies a week or more in advance from cable.

    And order pay-per-view for a movie that is not on TV. if I want to see it.

    There are so many options now for movies that people who leave netflix just have to shop around wisely.

  • Report this Comment On September 23, 2011, at 1:37 PM, HeyPacketMan wrote:

    One might think the Netflix breakup unlocks investor value. I disagree. The cash flow the DVD business generates would be important to bridge the uncertain timing of the transition to online content delivery and its sustainable profitability.

    The DVD business costs are manageable except for postage rates. Many of the cost factors that affect the online business are out of their control, trending in a bad direction or both. This has caused them to miss their projections for online take-up with their customer base. Their attempt to push their DVD subscriber base to the online model with pernicious rate hikes was what Daryl Issa might call "felony stupid".

    The online business is also capital intensive. One has to build these giant server farms and petabyte storage arrays and then distribute them around the world in Tier 1 data centers to manage bandwidth-mile charges. There are also significant recurring expenses for distributed hosting and bandwidth.

    Netflix views negotiated delivery rates with their Tier 1 providers as superior to the unpredictability of the postal service. However, consolidation in the service provider marketplace (witness Level 3's merger with Global Crossing) is slowing down the rate of bandwidth pricing declines that made online delivery so attractive.

    On the customer side, last mile bandwidth and streaming throughput is likewise beyond Netflix's control. This has been a key historical impediment to customer take-up of on-demand streaming. Regulated DSL providers are either unable or unwilling to aggressively boost bandwidth. Cable companies have little incentive to make it easy for online streaming to compete with their PPV services. For Netflix's mobile customers, the news is worse. AT&T & Verizon have dropped their unlimited data plans and T-Mobile throttles data streaming.

    The regulatory landscape is also uncertain. Net neutrality is a political football and if the consumer-side service providers have their way, the content streamers will soon have to pay up or get throttled.

    The technology to stream online content makes for a very shallow moat, I think the low barriers will result in a classic, immature commodity market with cutthroat race-to-the-bottom pricing. The cable providers will have a natural advantage by owning the last-mile plant while also having a decent amount of leverage with the studios.

    Besides the negotiating leverage the DVD business provides, Netflix needs the cash flow to hedge its uncertain transition to a business model that must operate and survive the coming shakeout in the online market.

    Their recent moves inspire little confidence that they really get it.

  • Report this Comment On September 23, 2011, at 5:39 PM, fsc137 wrote:

    I'm just delighted with TMF commentary on Netflix. Over the years, based on my interpretation of what TMF was telling me, I bought at $14, sold at $20, bought even more at $19, held on several years, sold out at $254 in June, went negative and bought puts in July, sold at a profit (but a little early) in early September. Now I'm buying in again below $150. We'll see.

    As far as being a Netflix customer, I was an early customer. Back then, we'd usually watch and send back two or three DVDs a week. We've had three Blu-ray disks sitting around for months now (and of course Netflix knows this), and we download from then net whenever there's "nothing to watch" on TV. I expect I continue to be a Netflix customer, but will drop Quikster.

  • Report this Comment On September 24, 2011, at 1:07 AM, daleinaz wrote:

    The business plan was always to go to streaming (that's why it's called "NETflix" and not "DVDs by mail"), but the streaming catalog is pitifully small. That is controlled by the studios, however, not by Netflix. One reason for the split is because the studios wanted more money to offer both DVDs and streaming.

    One other reason is that your privacy is protected on DVD rentals by law (they can't sell your list of rentals to other marketers). No such law protects your streaming history. They are talking about a deal with Facebook to recommend to your FB friends, the movies that you have recently viewed.

  • Report this Comment On September 24, 2011, at 10:02 AM, nick1200 wrote:

    The Netflix Streaming catalog has over 12,000 titles including Mad Men, Lost, Breaking Bad, 24, and recent movies like the newest Star Trek directed by J.J, Abrams.

    It also has the best catalog of documentaries by National Geographic, PBS, and Discovery. Oh, and did I mention no ads for any content? And the best user interface?

    At 7.99/month I have always felt like I'm getting a great deal. In fact, sometimes I feel like I'm not paying enough for how much I use the service.

    I still believe Netflix is the company the embodies best the future of online streaming.

  • Report this Comment On September 24, 2011, at 11:50 PM, lowmaple wrote:

    i have netflix through my telephone lines via internet and have not had any problems with the clarity. Guess some people are too fussy.

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