Netflix Customer Loss Worse Than Forecast

By Cliff Edwards - Oct 25, 2011 7:33 AM GMT+0800

Netflix, the video-rental service, posted third-quarter customer losses that were worse than its September forecast and predicted more cancellations over a price hike. The shares plunged 27 percent.

Domestic suscribers fell to 23.8 million as of Sept. 30 from 24.6 million three months earlier, a bigger decline than the company projected, according to a website statement today. This quarter, U.S. customers will fall short of the 24.9 million analysts were predicting.

The outlook suggests Netflix has been unable to contain a subscriber revolt over a price increase and aborted plan to force subscribers into separate streaming and DVD services. The company now forecasts losses in 2012 because of costs to offer content in the U.K. and Ireland, and will delay further expansion until profitability is restored.

'Pausing is a good thing from an investor standpoint,' Chief Executive Officer Reed Hasting said in an interview. 'We are going to pause and restore our global profitability.'

Netflix plunged 27 percent to $87 in extended trading after results were announced, putting its market-value loss at more than $10 billion since the stock made an all-time closing high of $298.73 on July 13, according to Bloomberg data.

Hastings, responding to questions, said he has no plans to step down and declined to comment on discussions with Netflix directors.

Subscriber Fallout

Investors are trying to gauge the extent of the fallout from the price increase and aborted plan to put DVD customers on a new service called Qwikster.

'To show even modest U.S. subscriber growth in the fourth quarter will require significant ramp-up in Netflix's marketing spending,' said Paul T. Sweeney, director of research for Bloomberg Industries.

Hastings downplayed the likelihood of a big increase in marketing efforts.

'Our streaming marketing has been very effective in the past two years,' Hastings said. 'We are going to work on improving the user interface, expanding to more platforms and delivering more content. There's no grand gestures, there's just a lot of steady and intense efforts.'

Domestic streaming subscriptions are forecast to decline this month, level off in November and rebound in December to end at 20 million to 21.5 million, Netflix said. DVD subscriptions will fall 'sharply' to 10.3 million to 11.3 million customers.

Fourth-Quarter Outlook

Fourth-quarter profit will be $19 million to $37 million, or 36 cents to 70 cents a share, on revenue of as much as $875 million, the company said. Analysts were projecting profit of $1.10 a share on sales of $919 million, according to Bloomberg data. The company earned $47.1 million, or 87 cents a share, on sales of $595.9 million, a year earlier.

Domestic subscriber growth is particularly important because Netflix has used its wide lead over U.S. rivals to finance growth in its streaming business and expand overseas.

Earlier today, Netflix announced it will begin selling subscriptions in the U.K. and Ireland in 2012, putting it in competition with Amazon.com Inc. (AMZN)'s LoveFilm.

Netflix had projected a loss of 600,000 users on Sept. 15 to end the third quarter at 24 million. The actual results were in line with the average loss of 780,000 customers seen by 10 analysts in a Bloomberg survey.

Domestic churn, a measure of subscriber turnover, jumped to 6.3 percent in the third quarter from 4.2 percent in the prior three months. The company's total subscriber count, including service in Canada and Latin America, fell to 25.3 million from 25.6 million

For the third quarter, Netflix reported net income rose 65 percent to $62.5 million, or $1.16 a share. Analysts projected 95 cents, the average of 25 estimates. Sales rose 49 percent to $821.8 million, beating expectations of $812.8 million.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

Taken from : Bloomberg


This is a weekly chart. Netflix has went up more than TEN TIMES your capital if you bought it 3 years ago. At the moment, it has dropped 60% from the peak due to the bad news. Hence, consolidation mode seen.

Question : Do you think they could overcome the damages DONE? For those who didnt get WHY I am checking on her, it is OK.

If you try to understand businesses and such, using technical charts to help you to check on the market psychology, you could benefit from your trades.

Netflix : Dropped to USD76 now ... it is 10.15 pm ... so, a DIVE of 35% in ONE HOUR.

Do you know why I posted this post this morning? Because I want to check if the PANIC selling is ... REAL?


Unusual Price Movement Encountered In (NASDAQ: NFLX)

Netflix, Inc. (NASDAQ: NFLX): fell by 37.28% or $-44.3/share to $74.54. In the past year, the shares have traded as low as $107.63 and as high as $304.79. On average, 7945050 shares of NFLX exchange hands on a given day and today's volume is recorded at 4583525. The shares are currently trading below the 50-day and 200-day moving averages which indicates that the shares have been experiencing downward momentum. The stock may bounce back to test the 200-day moving average. Thus, you may want to pay close attention for a move up to the $140.47 area but be careful because the stock may face selling pressure at this level.

Posted by Eric Savoie

TEH