Netflix, the DVD and Internet streaming behemoth has encounter more trouble. After first upsetting its customer base earlier this summer by upping subscription prices by 60 percent, after that splitting its business in two, then changing its thoughts, Netflix appears to have stepped into the mud once again over its dubious financial dealings.
According to the Artist Reporter, Netflix decided last week to try to raise profit a stock-and-debt offering, which many saw as a risky move with a company that has seen its stock value drop by over 70 % since announcing its price hikes. Because of that, the major credit score agencies have downgraded Netflix to BB, which is worrisome since it set off alarms all over Wall Street putting Netflix's stock prices at increased risk, and making it almost impossible for the company to boost the money it was looking to make to support its assertion it will more aggressively pursue newer movies; something it's user base may be clamoring for since the company began streaming movies.
The issue, as Netflix sees it, is licensing fees. Back within the early days of its meteoric rise, Netflix was seated fat and happy. All it had to do was drop DVD's into envelopes and send these phones users. But then, other companies started offering movies streamed on the internet, a direct challenge to Netflix's dominance. Netflix had absolutely no choice but to respond in kind, which it do, offering a streaming option for many of its films. The problem though, was that unlike DVD's, streamed movies are susceptible to licensing fees, which can add up in a hurry when you begin talking thousands of titles. Thus, when customers compared the amount of moves they could watch on DVD, versus the loading option, the offerings seemed rather paltry.
So, Netflix panicked and announced an enormous price hike to help pay for licensing fees therefore it could stream not just more movies, but more brand new titles. In reality, the hikes weren't so bad, something similar to an additional seven dollars a month. Most subscribers spent much on a tip for lunch. But they got upset anyway, because proportionally, it seemed like a lot. Therefore, a lot of customers got mad and went somewhere else, causing a loss of confidence in the company, as well as a drop in revenue, which led to the drop in stock prices and all of the rest.
Where will Netflix go from here? Based upon recent performance, it's hard to say, especially in light to the fact that even as Netflix is moving through its roughest area ever, competitors are scrambling to offer streamed movies cheaper. Whether they will be able to build up a library large enough to contend with Netflix though, is anybody's guess.
According to the Artist Reporter, Netflix decided last week to try to raise profit a stock-and-debt offering, which many saw as a risky move with a company that has seen its stock value drop by over 70 % since announcing its price hikes. Because of that, the major credit score agencies have downgraded Netflix to BB, which is worrisome since it set off alarms all over Wall Street putting Netflix's stock prices at increased risk, and making it almost impossible for the company to boost the money it was looking to make to support its assertion it will more aggressively pursue newer movies; something it's user base may be clamoring for since the company began streaming movies.
The issue, as Netflix sees it, is licensing fees. Back within the early days of its meteoric rise, Netflix was seated fat and happy. All it had to do was drop DVD's into envelopes and send these phones users. But then, other companies started offering movies streamed on the internet, a direct challenge to Netflix's dominance. Netflix had absolutely no choice but to respond in kind, which it do, offering a streaming option for many of its films. The problem though, was that unlike DVD's, streamed movies are susceptible to licensing fees, which can add up in a hurry when you begin talking thousands of titles. Thus, when customers compared the amount of moves they could watch on DVD, versus the loading option, the offerings seemed rather paltry.
So, Netflix panicked and announced an enormous price hike to help pay for licensing fees therefore it could stream not just more movies, but more brand new titles. In reality, the hikes weren't so bad, something similar to an additional seven dollars a month. Most subscribers spent much on a tip for lunch. But they got upset anyway, because proportionally, it seemed like a lot. Therefore, a lot of customers got mad and went somewhere else, causing a loss of confidence in the company, as well as a drop in revenue, which led to the drop in stock prices and all of the rest.
Where will Netflix go from here? Based upon recent performance, it's hard to say, especially in light to the fact that even as Netflix is moving through its roughest area ever, competitors are scrambling to offer streamed movies cheaper. Whether they will be able to build up a library large enough to contend with Netflix though, is anybody's guess.