Netflix CFO David Wells acknowledged today that “we’re a more humble team” following the consumer and investor backlash from a series of PR blunders. The company plans to “step back and look at all options and what we’ll do going forward” to satisfy consumers who were angered in July when the company said it would split its video streaming and DVD rental services — increasing prices by 60% for those who wanted to continue to have both. Lowering the price doesn’t seem to be on the table. That’s “a little bit like kicking the can down the road,” Wells said at the Goldman Sachs Communicopia Conference. “I don’t think it’s going to win back the customers we lost.” Instead, Netflix likely will secure more content and “repair that trust with the consumer over time.” Defections spiked shortly after the announcement, “but it went to zero shortly afterward.” The recent decision to rebrand the DVD business as Qwikster “introduced additional volatility into the consumer picture.” But the decision to have Qwikster also rent video games is “a signal that we’re continuing to invest and not abandon that consumer.”
On the competition front, Wells declined to comment on the likelihood that Amazon will beef up its streamed programming to feed a tablet computer it plans to release — or Dish Network’s plan to increase its offerings for a Blockbuster-branded service. “Inasmuch as we are a best in class entertainment service, there’s no reason they have to build their own or buy their own,” Wells said. “The more we’re viewed as a competitor, the less they’re likely to partner with us.”
Netflix’s own streamed offerings will focus more on TV shows following the collapse of its negotiations to renew its deal with premium channel Starz. “They were asking too much,” he said. With movie rights so closely tied to premium cable, the company is taking advantage of producers’ growing acceptance of digital streaming — and eagerness to collect Netflix’s cash. “What you’ve seen over the last 12 to 18 months is a move from people being reluctant to license to Netflix to (saying), ‘gee, Netflix doesn’t play in day-and-date, and I don’t see a huge cannibalization'” of TV viewing, he said. Netflix isn’t looking to become a content creator but might “experiment” with projects such as the original series House of Cards, due to be streamed in 2012. Netflix typically pays producers a fee based on the number of hours their content is viewed.
How did Wall Street respond? Netflix shares rose shortly after Wells began his presentation — but soon fell again. The company closed at $128.50, down 1.2%.
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