Netflix has ruled out reversing a controversial price increase that sparked a customer exodus and a share price fall of more than 35 per cent on Tuesday as investors reacted to a wave of subscriber cancellations.
Reed Hastings, chief executive, said it would be "accurate" to say that "we shot ourselves in the foot with the abruptness" of a summer price increase but said the company would not change course by cutting prices.
Instead, he defended Netflix's decision to lift prices by 60 per cent, insisting that the company's two services – DVDs by mail and online video streaming – were "great value".
Shares in the company, which this week unveiledplans to launch in the UK and Ireland, have collapsed since July when they touched $300. Since then a series of stumbles, notably the price increase and the widely derided plan to rename the company's DVD operation as "Qwikster" – which the company later abandoned – have driven the price down.
The company's reputation has suffered, with thousands of its customers taking to social media sites and blogs to vent their anger. Mr Hastings has even been lampooned on Saturday Night Live and this week gave an interview to the New York Times that revealed he discussed the price increase with a friend while soaking in a hot-tub.
Despite the criticism, Netflix said Mr Hastings had no plans to step down and that no investors had contacted the company over his role.
Netflix shares opened on Tuesday at $118.84 but fell 35 per cent in morning trading to $77 after the company said in its earnings report that the pace of subscriber cancellations had been higher than expected.
Netflix is trying to shift customers from its high margin DVD business, which is shrinking, to its lower margin streaming business, which has more growth potential.
Mr Hastings said: "We're almost exclusively focused on improving the streaming service. We will continue to run a great DVD service … we're just not going to invest in it."
Investors were most unnerved by an unexpected decline in the company's streaming subscribers. Netflix expects subscriptions to return to growth in December. "Streaming looked at in any reasonable time frame is going to grow and grow," said Mr Hastings.
Netflix has consistently outspent its rivals, such as Amazon, Hulu and Google for exclusive online content, but it is unclear what effect the collapse in the company's share price will have on its future spending plans.
The bigger impact could be on the broader media sector, said Richard Greenfield, an analyst with BTIG Research.
He said: "It's worrisome that the digital gravy train may be slowing down. Netflix has been a tremendous windfall for the media companies and the question everyone is asking is: will that windfall continue?"
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