Netflix Inc.’s stock price plunged to its lowest point in more than two years Tuesday after the online DVD rental leader reported the first quarterly customer losses in its history and dimmed its earnings outlook for the rest of the year.
To make matters worse, Netflix’s Web site — the hub of its rental system — went down Monday evening and remained inaccessible as of Tuesday afternoon (EDT). Spokesman Steve Swasey attributed the outage to an unanticipated problem that he declined to describe. Engineers hoped to fix the trouble by 2 p.m. EDT.
Netflix had been in the process of updating its computers to reflect price reductions that took effect Tuesday.
The timing of the breakdown was especially awkward because it occurred shortly after Netflix management had briefed industry analysts on plans to improve its customer service in an increasingly bitter battle with rival Blockbuster Inc.
Lowering prices will erode Netflix’s profit — a sacrifice that the Los Gatos-based company is making in an attempt to regain market share from Blockbuster. The decision led to a further drubbing of Netflix’s already battered stock, which has plunged by nearly 40% so far this year.
The shares dropped as low as $15.62 early Tuesday, its lowest point since June 2005. The stock later rebounded to $16.39, down 88 cents, or 5.1%.
Hoping to retain more of its current customers while enticing new subscribers, Netflix is decreasing monthly fees by $1 on its two most popular plans to match Blockbuster’s prices for comparable Internet-only services.
Frank Wilson is a retired teacher with over 30 years of combined experience in the education, small business technology, and real estate business. He now blogs as a hobby and spends most days tinkering with old computers. Wilson is passionate about tech, enjoys fishing, and loves drinking beer.