While Netflix still dominates the streaming video market to the tune of 65%, 2011 wasn't a particularly pretty PR year for the company. Netflix instituted a relatively-massive price hike, an announcement of a split off of their DVD and streaming services, a confusing reversal of that plan, and somehow found time to insult everybody in America. The company also decided several times to revamp a GUI that wasn't really broken in the first place -- instituting interface changes on both their website and Xbox 360 app that actually made their streaming product less useful.
Not too surprisingly, Netflix
took a significant customer satisfaction hit. There was also oodles of hand-wringing analyst pontification about how Netflix was doomed. Forgotten amongst these dour tirades was the fact that Netflix is competing against a cable industry that institutes bi-annual rate hikes, with their obliviousness to consumer price sensitivity teetering into the obnoxious.
The fact is that even at existing price points, with a streaming catalog that's increasingly sparse due to studio suffocation, Netflix still offers good value to content consumers.
Despite the awful-terrible-no-good-2011, Netflix's fourth quarter earnings report wasn't as bad as expected, with the company posting better earnings (revenue of $876 million) than Wall Street analysts predicted ($857 million). Netflix had warned investors the company would be losing money, but those losses will be due to international investment plans, not because of their clunky 2011 missteps.
The real indication of how customers handled Netflix's bumbling is in subscriber numbers, and on that front Netflix ended the year with 24.4 million U.S. subscribers, up 25% from one year earlier. Netflix gained 220,000 U.S. streaming-only subscribers -- but lost 2.76 million DVD-by-mail customers during the quarter. That latter stat isn't too surprising, given that studios are waging all out war on Netflix's ability to offer new releases, combined with the inevitable shift toward streaming video and away from physical media.
All in all however, tales of Netflix's demise are greatly exaggerated. One bit of note, Netflix made it clear they don't expect their domination of the video streaming market to last, with Amazon being their biggest, baddest competitor in 2012. "We expect Amazon to continue to offer their video service as a free extra with Prime domestically but also to brand their video subscription offering as a standalone service at a price less than ours," says the company.