Shocker: Netflix Blows Up Its Business Model
Streaming leader Netflix (NASDAQ: NFLX) saw its stock decline by a shocking 25% last night, after it reported first-quarter earnings. This followed another shocking decline following its fourth-quarter earnings report back in January. After starting the year around $600 per share, Netflix plunged to $260 as of after-hours trading on Tuesday night.
While the dip is shocking in and of itself, perhaps even more shocking is the degree to which Netflix executives seem to be panicking. The company all of a sudden spoke about two hugely important changes to its business model to make up for slowing sub growth, which means its subscriber headwinds may continue.
Admit it, because we've all done it: We've shared Netflix passwords with family. For sure, Netflix's no-hassle model of month-to-month subscriptions, with the ability to cancel at any time, as well as the ability for people in different locations to share their passwords, has served the company well in the past. Customers were delighted with the service, which marked a big step up from their unloved cable company. The practice allowed Netflix to grow subs like wildfire all over the world.
Source Fool.com
