September 21, 2011, 11:20 AM — Netflix has had a rough summer, what with:
* Its poorly received rate hike in July
* The breakdown of contract-renewal talks with Starz
* Last week's warning that Q3 subscriber totals will be lower than expected
* Monday's announcement that Netflix would spin off and rename its DVD-by-mail business (also poorly received by customers and investors)
Fortunately, Netflix finally has some good news -- I mean, besides the exciting news that even though customers who want DVDs and streaming will now have to maintain two accounts, visit two different websites and be billed separately, they'll still get their DVDs in those familiar red envelopes, except it'll say "Qwikster" on them!
Though it's not yet released a statement, Netflix has entered a two-year deal with Discovery Communications to stream episodes of the network's television shows, according to a Reuters article citing "people close to the deal."
Discovery, based in Silver Spring, Md., owns a number of popular cable properties, including Discovery Channel, TLC, Animal Planet and Science Channel. But until now it's been a holdout on the web, refusing to allow full episodes of its programming to be available online.
Only episodes from past seasons of Discovery programs will be streamed under the agreement, which protects the network's current episode inventory.
While financial terms weren't disclosed, the move is a no-brainer for Discovery, allowing it to monetize more of its content assets.
For Netflix, it's the tiniest of victories in a summer marked by stock-market meltdown. Shares (NASDAQ: NFLX) were up late Wednesday morning to 131.85, a gain of 1.4% over Tuesday's closing price of 130.03. But they're down 55% since the July 12 price hike, and 37% since last Thursday's Q3 warning.
Netflix's big problem now isn't lack of content (though that's a looming issue if Starz goes away early next year). Its real problem is that subscribers believe the company has betrayed their trust. And that's a far worse problem than skimpy content.