Dismal Earnings Report Expected From Los Gatos-Based Netflix

SAN FRANCISCO (KCBS)— Netflix is expected to reveal some dismal figures from their troubled third quarter earnings on Monday.

The Los Gatos company that brought us movies by mail is learning a hard lesson about the dangers of sudden change.

The loyal DVD by mail customers were turned angry in July when Netflix made a drastic price hike and service changes as it tried to navigate away from mail to streaming online movies and shows.

KCBS' Janice Wright Reports:

Kit Yarrow, who specializes in consumer psychology at Golden Gate University, said Netflix underestimated the passion of today's consumer and the instant communication between them.

"They have access to each other in a way that they hadn't before and sentiment can grow really quickly for or against a company," Yarrow analyzed.

Some estimates are predicting Netflix may have lost as many as 600,000 of its 24.6 million U.S. customers since July. Yarrow calls it a marketing bomb, akin to when Coke came out with New Coke which was meant to taste a little more like Pepsi.

"Again [Netflix] completely misunderstood the emotional relationship that people had with Coke."

Yarrow said that other companies should take notice of this situation and that understanding your customers is key.

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