Netflix Dramatically Lowers Domestic Subscriber Forecast for 2012

By Rob Scott
October 25, 2012

Netflix has lowered its U.S. subscriber forecast for this year by more than a third. The company lowered its April prediction of 7 million new subscribers for 2012 down to 4.73-5.43 million.
The news knocked its share price down 16.3 percent in after-hours trading on Tuesday.
“Netflix has said that incremental domestic streaming subscribers are almost pure profit because its content costs are fixed,” reports the Wall Street Journal.
“But even taking the high end of Netflix’s new subscriber-guidance range, there will now be a shortfall of 1.57 million,” explains the article. “So multiplying that number by the roughly $96 those customers would have paid in a year ($7.99 a month) means gains to operating profit would be shaved by around $150 million.”
Netflix saw some international expansion with nearly two million new subscribers and says it lost fewer DVD customers than it had in the previous quarter. However, any loss in DVD subscribers is a significant problem in the minds of analysts.
“Those subscribers are four times more valuable than streaming subscribers in terms of their contribution to overall profit,” writes WSJ. “Netflix remains a grim picture for investors.”

No Comments Yet