Netflix's Puzzling Breakup With Its Customers

| About: Netflix, Inc. (NFLX)

“Dear Netflix” (NASDAQ:NFLX) is a trending topic on Twitter today and you don’t need to set up any sophisticated social listening software to get the message:

@jerrybyers Dear Netflix, I only knew you for a short time. Streaming library is limited and Redbox is a lot cheaper. See ya. #fail

The social media backlash to Netflix’s price increase was instant and voluminous. And, not surprisingly, it was 100% negative. Reed Hastings, CEO of what used to be everyone’s favorite video rental service, has been nicknamed “Greed Hastings” in the Twitisphere, Facebookistan and throughout the Interweb.

In case you missed the details: You will now pay $7.99/month for DVD rentals by mail, or $7.99/month for access to the streaming service, or $15.98/month for access to both. That’s a 60% increase for all you econ majors out there.

Here’s a tweet that sums up the perceived business model:

@NuAngel Dear Netflix, brilliant business plan! Run all video stores out of business, than jack up the prices so we have nowhere else to go! #fb

And here’s a tweet that sums up brand sentiment:

@droberts0503 Dear Netflix, I got your breakup email. Sorry to hear you don’t want me to be with you anymore.

All in all, I’d say Netflix has a hell of a PR problem. It has dramatically raised prices and offered no additional services. Additionally, the streaming library is exceptionally limited and not worth $7.99 per month. There are other services like Hulu Plus, ESPN and Amazon (NASDAQ:AMZN) that are more attractive. When you figure in Blockbuster’s $4.99 month-long pass for unlimited kids rentals (kids is a big category on Netflix Streaming Service), Blockbuster’s $0.49 Sunday rentals, RedBox, and the local video store (if one still exists), a $16/month Netflix bill doesn’t seem to be that much of a bargain.

Will Netflix bend to the social media pressure? Will it listen to the voice of its customers and roll back its pricing? If it doesn’t, will its stock take a hit? Will Netflix lose customers? Time will tell.

If you’re wondering what I’m going to do with my account, I will not pay for the DVD service – I don’t use it anymore. And, unless the streaming library grows considerably in the next few month, I will probably cancel that service too.

All this as the Netflix “Red Button” starts to hit consumer electronics devices, remote controls and Netflix widgets and apps abound. Oh wait, maybe this is all just social media noise and Netflix will emerge bigger, stronger and more powerful? Maybe not.