It was easy to bash Netflix
Speaking at a JPMorgan conference, CFO David Wells had some encouraging comments about both the current quarter and its ability to win back users who had previously cancelled the service. "The improvements in retention and our growth in Q1 and Q2 since Q3 and Q4 of last year make us feel pretty good," he said.
If you didn't catch that, he's confirming that there is growth here, midway through the company's second quarter. Wells also revealed that a third of the company's new subscribers are folks rejoining after having cancelled Netflix over the past year.
Users are coming back. Where are the investors?
Looking back in anger
A lot of people left in disgust during last summer's pricing change and short-lived Qwikster fiasco, and Netflix paid the price. The stock that poked its head above $300 last July has gone on to shed more than two-thirds of its peak value.
Netflix shares are closing in on a two-year low. There's a disconnect between investors and users of the service, and the former isn't paying attention to the latter.
The wave of defections during last year's third quarter was brutal, but Netflix is exactly where it wants to be these days. It closed out the first quarter with nearly 30 million subscribers worldwide, and all but 3 million of them are streaming.
DVD renters are still leaving, and Netflix is fine with that. Coinstar's
Netflix is growing -- domestically and abroad -- on the streaming end. That's the company's future. The growing audience validates the strategy, and Netflix's insistence on sticking to its $7.99-a-month price point, even if it upsets studios that want Netflix to charge more or introduce different pricing tiers, is resonating with video buffs.
Streams come true
Netflix closed out the first three months this year with 3 million more streaming accounts than when the quarter began. If we go by Wells' comments, a million of those new members were people who nixed the service last year. If we go by gross additions, the figure will be even higher.
This is huge.
Some may have tried rival services, though there isn't really a lot out there at the moment. Comcast
It's true that investors overestimated Netflix's potential last summer. We didn't know that the company would have to spend so much money to expand overseas. We also saw the dual-plan pricing as an opportunity to grow revenue per user, even though now we realize that it's a slow crawl down to $7.99 a month.
However, the same disconnect that saw investors cheering as subscribers were jeering -- the stock went on to hit its all-time high several days after Netflix introduced its new pricing strategy -- finds both parties switching places.
Subscribers are cheering. Investors are jeering. We know which group was the better indicator of which way Netflix's stock was heading then. Why can't the same group be right again -- with Netflix's stock moving higher?
The customer's always right.
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