Customer service reps are telling callers that a day before unveiling a price hike, managers told them to expect some angry calls. A Wall Street analyst has accused Netflix of being unprepared for backlash. 
 
 (Credit: Netflix) 
 
 Netflix managers knew some customers would be unhappy with the company's decision to raise prices, and a day before announcing the fee increase they told customer-service personnel to be prepared for angry callers. 
 
 Some of Netflix's customer-service representatives told subscribers today that they added extra employees in the department to help handle the flood of calls, many of them emotional, the employees said. Hundreds of Netflix employees were answering phones today and that still wasn't enough to prevent some callers from experiencing extended delays before speaking to a Netflix employee, the reps told customers. 
 
 
 
 
 
 Starting in September, the company will no longer offer users the ability to access both streaming video and by-mail DVDs for $9.99 a month. Netflix said Tuesday that it was splitting each distribution mode into two separate subscription plans, each costing $7.99 per month. To receive both, subscribers must pay $15.98. The announcement saw the company's blog fill up with 4,000 responses, most of them negative. Over the past couple days, there was speculation that Netflix didn't anticipate how the price increase would anger some customers. 
 
 Netflix spokesman Steve Swasey confirmed that Netflix had indeed prepared employees to receive a certain amount of calls from those unhappy with the hike. Swasey said Netflix did not go into this with its eyes closed. 
 
 "We tested, we researched, we analyzed," Swasey told CNET this evening. "We knew what the reaction would be. We are not surprised. We knew that there would be some people upset by the service and with the price being adjusted." 
 
 Rich Greenfield, a Wall Street analyst with BTIG Research, conducted a test of how Netflix's customer service department was handling calls following the announcement. In a report issued today, Greenfield said he learned Netflix was being overwhelmed by calls. He said BTIG made 35 calls over two hours and waited on hold typically between 9 minutes and 15 minutes. 
 
 Greenfield also said he was unhappy with the response from Netflix employees. He wrote that they suggest to those who threaten to cancel their subscription that they should wait until September, when the plan is due to take effect. 
 
 "There was simply no promo or 'save' technique to offer us a discount to retain our business," Greenfield wrote. "This would appear to illustrate that Netflix is simply not concerned with the prospect of losing customers." 
 
 I called Netflix's customer-service number this evening. I waited 9 minutes on hold and was greeted by a male employee who was polite. The Netflix employee said that he was instructed not to rush anybody off the phone and to hear people out--their complaints or suggestions--and to process cancellations if that was what they wanted. He acknowledged that there were a lot of extra people working the phones and that there seemed to be a lot more callers than reps. 
 
 What everybody wants to know is, are the scores of complaints to the company and those being posted around the Web enough to convince Netflix to backpedal or offer a concession? It doesn't sound that way. 
 
 When asked these questions, Swasey said: "These are our prices." ||||| Netflix is giving investors a front-row seat to the sequel of the dot-com crash. 
 
 Shares of Netflix (NFLX) on Tuesday crumbled $41.47, or 35%, to $77.37, adding the latest scene in the stock's horror show this year. The stock continued to fall Wednesday. 
 
 Shares have fallen 75% from their high this year, as investors react to customer defections from price increases and strategy changes. 
 
 Netflix, though, is just one of the latest in a recent rash of stocks suffering massive one-day sell-offs that bring back memories of the kind of carnage that was common after the Internet stocks crashed to Earth in 2000. First Solar crashed $14.68, or 25%, to $43.27 Tuesday on news that the alternative-energy company's CEO has been replaced. That comes a week after Crocs, a maker of rubber clogs, fell 39% in a day. 
 
 So far this year, stocks in the Standard & Poor's 1500 index have fallen 30% or more in a single day 16 times, already topping the 12 such instances in all of 2010, says S&P Capital IQ. There were 111 such big drops in 2008, the most in the past five years, S&P Capital IQ says. 
 
 But investors caught holding these blowups suffer brutal losses that can take years to repair. "It's a warning to investors. If you buy hot stocks, you're likely to get burned," says Alan Skrainka, chief investment officer at Cornerstone Wealth Management. 
 
 The recent stock blowups are a reminder to investors to mind the perils of: 
 
 •Momentum stocks. Certain stocks dazzle investors because they don't seem to ever go down. But as soon as there's even a whiff of bad news, investors run, says Michael Corty, analyst at Morningstar. Other stocks investors are turning on include Green Mountain Coffee Roasters and Red Robin Gourmet, which are now down more than 35% from their highest points in the past 52 weeks. 
 
 •Shifts that kill business models. Negative shifts in the economics of a business light the fuse. For instance, content companies are charging higher fees from Netflix for the streaming business, making it a much less attractive business than the DVD-by-mail model, says Tony Wible of Janney Montgomery Scott. 
 
 •Buying what you know. Investors may have bought Crocs or Netflix because they liked the service. But that strategy often disregards the critical step of valuation, or how much you pay for the shares, Skrainka says. "The idea that you like the product so you buy the stock is a silly idea," he says. "Some people are finding that out for the first time." ||||| SAN FRANCISCO (MarketWatch) — The meteoric rise of Netflix Inc. has led many analysts and industry figures to call the online video-rental business a “momentum story.” But on Thursday, Netflix cut its quarterly subscriber forecast, leading those already skeptical about the company to say its momentum has faltered. 
 
 Reuters Netflix CEO Reed Hastings in June, before the company announced price increases that resulted in fewer-than-expected subscribers for the third quarter. 
 
 Before the market opened, Netflix NFLX, -0.05% reduced its U.S. subscriber forecasts for the third quarter. The company now expects to end the quarter with 24 million total subscribers in the United States, down from an earlier estimate of 25 million. 
 
 Netflix also lowered its estimates on video-streaming subscribers to 21.8 million from 22 million, and its DVD-only subscribers to 2.2 million from 3 million. 
 
 The decline is attributed to Netflix’s plans to split its DVD-rental and video-streaming offerings into two distinct plans. Customers now will have to pay either $7.99 a month for unlimited video streaming, $7.99 a month to have one DVD out a time or $15.98 for both — whereas those plans combined previously had cost $9.99 a month. Those price changes take effect this month. 
 
 The news caused a selloff on Netflix stock. By the time the market closed, Netflix’s shares had fallen by $39.46, or almost 19%, to close at $169.25. The losses erased all of Netflix’s gains for the year and sent the shares to their lowest point since last November. 
 
 Analysts who previously had been dubious about the company’s prospects found even more ammunition with Thursday’s announcement. “They had been getting more subscribers, which helped them acquire more content, which got them more subscribers,” said Tony Wible of Janney Montgomery Scott, who rates the shares as a sell. “But they found that raising prices and lowering content was a momentum-breaker.” 
 
 Netflix’s case hadn’t been helped by a breakdown in talks over continuing its content deal with Liberty Media Corp. LSTZA which provided content from its Starz programming library. The current deal is set to expire at the end of February 2012. 
 
 Even analysts that are enthusiastic about Netflix said it’s difficult to find something positive in the company’s subscriber announcement. 
 
 “They’re missing most of the subscribers on the DVD-only plan, so that’s kind of the silver lining,” said Mike Olson, of Piper Jaffray. “But they’re missing DVD customers without the offsetting additions in video streaming.” 
 
 Olson has a buy rating and $330 price target on Netflix. 
 
 Netflix’s share gains had made it one of the market’s stars of the last year, with the company’s stock reaching an all-time high of $304.79 on July 13. At that point, it had risen 73.5% during the year. 
 
 “They had a balance that was working at the $8-to-$10 a month price plan,” said Michael Pachter, of Wedbush Securities, who also rates the stock as a sell. “But then content owners wanted more money, so their [Netflix’s] reaction was to charge more for content, and they exacerbated that with a price increase.” 
 
 Despite the negative reaction, Netflix stood by its decision to split its pricing plans. 
 
 “We know our decision to split our services has upset many of our subscribers, which we don’t take lightly,” the company said in a statement. “But we believe this split will help us make our services better for subscribers and shareholders for years to come.” 
 
 Pachter said he wasn’t sold on this reasoning. “Each time you lose some content, you’re going to lose some customers,” he added. “If you reduce your content by X%, you’re going to lose Y% of your customers. Now they’ve raised prices and reduced content, and the value proposition is getting worse.” ||||| Oct. 25 (Bloomberg) -- Netflix Inc. dropped the most in seven years after the video-rental service said it lost 800,000 U.S. subscribers in the third quarter, more than expected, and predicted more cancellations over a price increase. 
 
 Netflix plunged 37 percent to $75.28 at 9:39 a.m. New York time, for the biggest intraday decline since October 2004. The stock closed at an all-time high of $298.73 on July 13, according to Bloomberg data. 
 
 The outlook suggests Netflix has been unable to contain a subscriber revolt over a price increase and aborted plan to force subscribers into separate streaming and DVD services. The company now forecasts losses in 2012 because of costs to offer content in the U.K. and Ireland, and will delay further expansion until profitability is restored. 
 
 “Pausing is a good thing from an investor standpoint,” Chief Executive Officer Reed Hasting said in an interview. “We are going to pause and restore our global profitability.” 
 
 Hastings, responding to questions, said he has no plans to step down and declined to comment on discussions with Netflix directors. 
 
 Domestic subscribers fell to 23.8 million as of Sept. 30 from 24.6 million three months earlier, a bigger decline than the company projected in September, according to a website statement yesterday. This quarter, U.S. customers will fall short of the 24.9 million analysts were predicting. 
 
 Subscriber Fallout 
 
 Investors are trying to gauge the extent of the fallout from the price increase and aborted plan to put DVD customers on a new service called Qwikster. 
 
 “To show even modest U.S. subscriber growth in the fourth quarter will require significant ramp-up in Netflix's marketing spending,” said Paul T. Sweeney, director of research for Bloomberg Industries. 
 
 Hastings downplayed the likelihood of a big increase in marketing efforts. 
 
 “Our streaming marketing has been very effective in the past two years,” Hastings said. “We are going to work on improving the user interface, expanding to more platforms and delivering more content. There's no grand gestures, there's just a lot of steady and intense efforts.” 
 
 Domestic streaming subscriptions are forecast to decline this month, level off in November and rebound in December to end at 20 million to 21.5 million, Netflix said. DVD subscriptions will fall “sharply” to 10.3 million to 11.3 million customers. 
 
 Fourth-Quarter Outlook 
 
 Fourth-quarter profit will be $19 million to $37 million, or 36 cents to 70 cents a share, on revenue of as much as $875 million, the company said. Analysts were projecting profit of $1.10 a share on sales of $919 million, according to Bloomberg data. The company earned $47.1 million, or 87 cents a share, on sales of $595.9 million, a year earlier. 
 
 Domestic subscriber growth is particularly important because Netflix has used its wide lead over U.S. rivals to finance growth in its streaming business and expand overseas. 
 
 Netflix had projected a loss of 600,000 users on Sept. 15 to end the third quarter at 24 million. The actual results were in line with the average loss of 780,000 customers seen by 10 analysts in a Bloomberg survey. 
 
 Domestic churn, a measure of subscriber turnover, jumped to 6.3 percent in the third quarter from 4.2 percent in the prior three months. The company's total subscriber count, including service in Canada and Latin America, fell to 25.3 million from 25.6 million 
 
 For the third quarter, Netflix reported net income rose 65 percent to $62.5 million, or $1.16 a share. Analysts projected 95 cents, the average of 25 estimates. Sales rose 49 percent to $821.8 million, beating expectations of $812.8 million. 
 
 --Editors: Rob Golum, Anthony Palazzo ||||| LOS ANGELES/NEW YORK (Reuters) - Netflix Inc, facing a backlash from customers upset over a price hike, warned its subscriber growth would cool down in the third quarter, and its shares fell 10 percent. 
 
 The movie rental company, whose stock is up 850 percent since early 2009, set off alarm bells on Monday when it said customer defections would take a bite out of its subscriber count. 
 
 Netflix will essentially end the third quarter with the same number, or only slightly more, subscribers as it had at the end of the second quarter. For investors accustomed to spectacular growth, the forecast represented a bitter pill and made clear that customers are sufficiently upset over a recent change to cancel the service. 
 
 Those cancellations will largely offset any new subscriber additions in the third quarter, and pressure financial results. Netflix forecast earnings and revenue for the third quarter that would come up short of current analyst estimates. 
 
 And that is on top of a second quarter revenue figure that looked light to analysts. 
 
 Netflix "came into the quarter as Superman and it looks like they ran into a little bit of kryptonite and lost some of their super power," said Barton Crockett, an analyst with Lazard Capital Markets. 
 
 The company forecast third-quarter revenue of between $780 million to $805 million in the United States compared with an average analyst estimate of $846.5 million, according to Thomson Reuters I/B/E/S. It is expecting global earnings of 72 cents a share to $1.07 a share, which is also below the current analyst estimate of $1.09 a share. 
 
 Netflix shares fell about 10 percent to $253 after closing at $281.53 in the regular session on Nasdaq, wrongfooting options traders who were betting that the stock would keep chugging higher, and bringing some welcome relief to short sellers. 
 
 "It's too early to call on Netflix's future at this point. I have a 'sell' rating on the company based on its high valuation, but I'm not shorting it because it's still a great company," said Brett Harriss, analyst at Gabelli & Co. "There's just not enough margin of safety to buy it here." 
 
 NO FLAWS ALLOWED 
 
 Previously, Netflix wowed Wall Street with big subscriber additions quarter after quarter, and investors piled in. The company trades at 61 times this year's earnings estimates, a valuation that brings high investor expectations. 
 
 While "the business is still healthy," the company's results must be "flawless to support a stock" at those levels, analyst Crockett said. 
 
 Netflix sparked a backlash earlier this month when it announced it was raising prices as much as 60 percent for plans that provide DVD rentals and online streaming of movies and television shows. Thousands of subscribers complained on the Netflix blog and Facebook page with many threatening to cancel their subscriptions. 
 
 In a letter to shareholders, Netflix said: "We hate making our subscribers upset with us, but we feel like we provide a fantastic service and we're working hard to further improve the quality and range of our streaming content." 
 
 By the end of the third quarter, it estimates it will have about 25 million total U.S. subscribers. That is barely more than the 24.59 million it now has. 
 
 The company said it expected customer growth to return in the fourth quarter. With the full impact of the price hike, the fourth quarter also could be "our first billion dollar global revenue quarter, driven by strong U.S. performance," the company said. 
 
 For the second quarter, the company's revenue rose 52 percent to $788.6 million, but fell short of the average analyst estimate of $791.5 million, according to Thomson Reuters I/B/E/S. 
 
 Second-quarter earnings surpassed expectations in rising to $68 million, or $1.26 a share, from $44 million, or 80 cents a share, in the period a year ago. 
 
 (Additional reporting by Yinka Adegoke and Jennifer Saba in New York; Editing by Gary Hill and Carol Bishopric)
– Netflix's new subscription plan, which hikes the cost of enjoying both streaming videos and sent-in-the-mail DVDs from $9.99 to $16—that's 60%—isn't winning it many friends. Amid a sea of anger, Newser picks some favorite reactions: Points for brevity: "Netflix sucks," opines Pat's Papers. No wonder then that this current subscriber will "be canceling as soon as I find the Sharpay’s Fabulous Adventure DVD we rented most recently." Best summary of why we're so angry: "It’s not the $6," explains Matt Burns for TechCrunch. "It’s that Netflix raised the prices without adding any value. There simply isn’t any way of spinning this as a benefit to the consumer." The best "Dear Netflix" tweet: @theroxy quips, "Dear Netflix, As much as we love the 'cerebral romantic comedy documentaries' genre you suggested, paying double is insane. k thx bai." Best (and only?) defense of the move: In a piece for Forbes titled "Could We All Please Shut Up About Netflix," Elisa Douchette writes that "What completely befuddles me about this entire situation is the belief we as consumers are OWED something by Netflix. Last I checked, Netflix is a publicly traded FOR-PROFIT company. If you want cheaper movies? Then get a public library card." To dig deeper into the rich history of America's love affair with Netflix, check out this map of the most popular Netflix movies, by state.