SmartMoney Blogs

Pay Dirt
A daily look at what we buy, how we spend, and the companies that do right - and wrong - by their customers.

Netflix: ‘Arrested Development’ For Customers?


Last month, Netflix was pummeled by disgruntled customers. Now shareholders are fuming, sending stocks plummeting to a new low this year. But if the company’s woes continue, it’s the company’s loyal subscribers who may be the most disappointed, analysts say.

Netflix customers should be concerned that the digital offerings will not continue to grow as quickly if the company’s fortune’s don’t improve, says Dan Rayburn, a principal analyst with Frost & Sullivan. The Internet movie site has been expanding its catalogue, but not in ways that appeal to everyone, he says. Netflix paid for the exclusive rights for shows like “Mad Men” and is producing a new season of the cult-hit “Arrested Development.” But, despite the media coverage these deals generated, these shows alone are not going to drive customer demand, Rayburn says. “I’m a consumer of Netflix and I could care less about Arrested Development.”

The company says its $400 million capital-raising measure and its deal for “Arrested Development” are not related. “We did raise some capital, it’s nice to have, but we don’t need it,” says spokesman Steve Swasey. “It has nothing to do with Arrested Development.” (On Monday, it also warned of a loss in 2012 and increased investment in its overseas business.)

As Pay Dirt reported, 810,000 people canceled their Netflix subscriptions in the quarter. Amazon has an edge over Netflix: Amazon owns the back-end web infrastructure that powers streaming offerings – Netflix itself uses Amazon Web Services – which helps keep costs down.

What’s more, Netflix did a U-turn on plans last month to separate its DVD-by-mail and video-streaming businesses. That news was welcomed by customers who were deeply unhappy about the inconvenience of having to access two websites for those services. But, as Pay Dirt reported, customers who use both services still have to pay 60% more.

In Netflix’s favor, it has 20,000-plus titles available for streaming versus 12,000 on Amazon’s streaming site. Amazon is also cheaper than Netflix: $79 a year for Amazon Prime versus $95.88 a year for Netflix’s unlimited streaming plan. Swasey says the subscriber cancellations have continued to decline, but says the company is not changing its strategy to focus on exclusive deals. “We have tens of thousands of TV shows spanning dozens and dozens of genres,” he says.


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (0)

    • Be the first to leave a comment on this blog.

About Pay Dirt

  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to or tweet @SMPayDirt.