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Flicker

Thought Netflix made some missteps recently, recovery for the firm will be easier than a botched development deal.

By Tony LoPinto | Updated on October 25, 2011

Flicker Today’s front page of the WSJ carried the story that Netflix’s stock plummeted an additional 26% yesterday on the heels of one of the greatest faux pas in media/technology history. Netflix was the darling of new media, capitalizing first on direct mail of DVDs, then artfully transitioning to high-speed streaming. The stock decline followed Netflix’s quarterly earnings report that indicated, while up on profits and revenues, the company was haunted by its decision last month to raise prices and its botched effort to separate DVD rentals from its streaming-video services. Those moves caused more than 800,000 subscribers to cancel their accounts in the third quarter and removed a lot of goodwill with investors. This is a classic example of how ill-conceived decisions on the course of business can cause a company to lose its stride and experience major setbacks. In contrast to the media industry, real estate is a hard-asset business with major capital commitments associated with investments, so it’s a different story if a misstep occurs. It is possible that Netflix can get back on track over the next several quarters, but it is much harder – if not impossible – to recover from a botched development deal.

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