A Series of Poor Decisions Puts Netflix in a Tight Spot

Is Netflix (NASDAQ:NFLX) on its way to becoming a has-been or can it turn its sinking ship around? The DVD rental and video streaming company enjoyed wild success for nearly a decade, but has recently stumped analysts with a series of damaging moves.

The decline of Netflix began in July, when the company split its mail and Internet streaming into separate subscription plans and simultaneously announced a 60% price increase. The increase outraged loyal Netflix customers and caused major subscription loss along with a plummeting stock price.

The company’s next poor decision followed just two months later when Netflix CEO Reed Hastings announced that the DVD mailing system would be re-named Qwikster. The decision was rescinded just three weeks later and it was decided that the separate subscription plans would both remain under the Netflix name.

The poor decisions have apparently taken their toll as Hastings announced in late November that the company was looking to raise $400 million in stock-and-debt offerings, although the company claims that it doesn’t need the funds. Many speculate that the company is raising cash in order to compensate for overspending for high dollar movie and sitcom content.

The Hollywood Reporter’s Paul Bond wrote, “Competitors smell blood, and Amazon (NASDAQ:AMZN), Hulu (NYSE:DIS)(NASDAQ:CMCSA), Google (NASDAQ:GOOG) and YouTube, Apple (NASDAQ:AAPL) and iTunes and Dish (NASDAQ:DISH) and Blockbuster are circling.”  Steve Birenburg of Northlake Capital Management told The Hollywood Reporter, “There is legitimate concern that the fountain of money they paying from for content will dry up.  Amazon or Hulu or Google need to step up to make it a multi-buyer game.”