Netflix has been in the business news headlines recently for the wrong reasons. It’s stock price has lost approximately 67% of its value since July, dropping to the current price of $113.27 from $298.73. How did this happen? An absolute series of blunders by the top management.
First, two months ago, Netflix increased prices for the second time in less than a year as it divided DVD and streaming services into two separate businesses. Shortly after, over 1 million left in frustration over the move. If you want to lose your customer base quickly, raise prices for your loyal customers by 60% as the country is heading into a uncertain economic time.
CEO Reed Hastings knew the decision would not be popular--he sold off $41 million of stock directly before all the changes in a debatable move that could be considered insider trading. After Mr. Hastings issued a public apology for raising prices and splitting the DVD and streaming businesses, investors sold off their shares in Netflix rapidly. The stock has dropped over 30% in the past week. Selling off $41 million of your own stock before making widespread changes to your business is a questionable move from any CEO.
For now, our family has canceled the DVD by mail option and sticking with the streaming option. I will immediately inform the higher-ups that pay the bills if I find a company that offers a wider selection and variety of movies and tv shows.
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