Netflix, the US DVD rental and video streaming company, have recently had some troubles as customer numbers fell dramatically following a 60% price increase accompanied by an announcement that it was spinning off its rental company from its streaming company.  However, it has announced today that it is abandoning this plan (click here). 

From August, Netflix's stock price has fallen from circa $300 to $125 today.  See Sunil Gupta from HBS comment on Netflix's basic errors of judgement.  The Netflix case is an example of how corporate executives can destroy shareholder value through poor decision making.  It is also an example of why executives need to understand economics more than other disciplines taught in business schools.  Given the competition in this sector plus the price elasticity of demand, Netflix executives should not have made such a strategic blunder.

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