“… intense competition slowed second quarter revenue and subscriber growth…”
– Reed Hastings, CEO Netflix
“Blockbuster is kicking their butts…”
– Michael Pachter, Analyst, Wedbush Morgan
“…. competition from Blockbuster has been wreaking havoc with Netflix’s business……”
– Derek Brown, Analyst, Cantor Fitzgerald
On Sunday, Netflix lowered the price of its two most popular DVD rental subscription (subscription required) plans by $1 per month to match the price being charged by Blockbuster for comparable plans.
Yesterday it announced that, for the first time in its history, it had less subscribers at the end of the quarter than it did at the beginning (see pg. 8 of their 2nd quarter release).
Five analysts have lowered their rating on Netflix from “Buy” to “Hold” in the last two days: Cantor Fitzgerald, Jefferies, Cowen, Needham and Lehman (Yahoo! Analyst Opinion).
Their stock is down 18% in the last two days.
There’s a war going on in the online DVD rental business and the cool aid drinkers over at the Motley Fool (who still have 4 times as many “Outperform” as “Underperform” ratings on the stock) can no longer credibly dismiss Blockbuster as a pretender.
In fact, when Blockbuster reports 2nd quarter earnings Thursday before the open, I wouldn’t be surprised if they added more than 1 million subscribers to their Total Access plan in the 2nd quarter.
If they can keep costs down and show a profit their stock should jump and Netflix’s might experience even more pain.