Netflix's Moments of Truth

Netflix has been so popular and resilient that it's hard to believe how poorly it handled its price increase and subsequent proposal to split into two companies, one for DVDs and one for streaming entertainment. (I've been a customer for years, DVDs being my preference, and after the price hike, I chose DVD-only rather than pay more for the privilege of streaming as well.)

Announcing that DVD-only subscribers would be shunted to a new division, Qwikster, caused such an uproar among inconvenienced customers that CEO Reed Hastings soon reversed this decision and did away with Qwikster. But the damage had been done.

Now that Netflix's latest quarterly earnings are out, it's clear that the company is losing subscribers--more than 800,000 defected in the last quarter. In other words, subscribers are voting with their money. And the defections may not be over.

As Netflix expands into other nations, its strong US base is not as sturdy as it was even 6 months ago. Plus Netflix's stumbles are hurting its standing in the financial community.

As the Washington Post points out, the battle for our living room is far from over, and once-dormant competitors like Blockbuster are scoring points. This year has brought several moments of truth for Netflix--and so far, the company is standing but staggering.