Netflix’s situation just went from good to bad in a matter of moments. Their stock is down 25 percent after receiving the earnings report for the last quarter which was far from appropriate considering Netflix’s previous successes. This disappointing report is being linked to the fact that Netflix had fewer subscribers in the last quarter than they had expected.
This unexpected occurrence starts to make more sense when one looks deeper into the company’s recent decisions. Over the summer, Netflix raised the price for their services by a $1. The number of subscriptions were definitely lowered after this. However, HBO’s announcement to create their own subscription service was enough to compete with Netflix’s services and had a larger impact on people who were deciding to subscribe to Netflix. HBO’s announcement couldn’t have come at a better time.
However, in order to keep up with Netflix, HBO has to make a wide array of changes to their selections. If this does happen, there could be a sudden shift in the consumer’s preference. A shift to HBO’s services would be surprising considering Netflix’s domination in the past.
Such a sudden drop in subscribers also shows that consumers might actually be a lot more cost-conscious than companies previously believed. With more changes and few decent programs added, Netflix might just be able to bring themselves out of this mess. But for HBO, this could very well be a golden opportunity.