Netflix misses subscriber target for third quarter

The video-rental service added 1.2 million new US subscribers in its third quarter, falling just shy of the number it needed to hit its full-year target of 7 million, but the company's financial performance was in line with analyst expectations.

(Credit: Netflix)

Netflix, the online movie-rental service, reported a third-quarter net profit of $8 million, or 13 cents a share on revenue of $905 million, the company said after the close of trading today. Revenue was up 10 per cent from the $821 million the company reported in the same period a year earlier.

Netflix said that for the quarter ending 30 September, the number of US streaming subscribers had increased by 1.2 million. The company now has a total of 25.1 million domestic streaming customers.

CEO Reed Hastings said has previously that the company needed to add nearly 1.8 million new US streaming subscribers in this quarter to have a chance at making good on its goal of adding 7 million new customers for the year. The company now estimates that it will see an increase of 5.4 million customers for all of 2012.

Investors have always looked at how proficient Netflix is at attracting new US streaming users to determine the health of the company's business model, with this latest quarterly performance not pleasing Wall Street one bit.

In after-hours trading, Netflix shares were down US$10, or 15 per cent, to US$57.98.

If you're keeping score, a couple of weeks ago, Netflix shares spiked on a lot of hopeful analyst reports that were based on some iffy metrics.

The Netflix sceptics countered with their own tea-leaf readings, and the stock lost much of its earlier gains. The stock has gone up and down since, but in this instance, it was the doubters who were right.

Hastings had predicted that the Olympics, as well as the northern hemisphere summer, could have dampened the public's desire to watch movies and sign-up to Netflix.

But some investors aren't buying that excuse. They fear that increased competition and Netflix's inability to renew licensing agreements for films from some of the top Hollywood studios is starting to hurt the company's attractiveness.


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