updated 05:05 pm EDT, Mon October 24, 2011
Netlfix loses 800K subs over pricing, Qwikster
Netflix faced a tough end of the year after tough results and a more difficult fall. It lost 800,000 subscribers in the US over a combination of its price hikes for those who want to both stream and watch DVDs as well as the flip-flop on Qwikster. It ended up with 23.79 million total US customers, lower than the 24.5 million most market watchers had predicted.
The company's actual revenue and profits were up 49 percent and 63 percent each, to $822 million and $62 million. Most of the better results came from those in Canada and Latin America, which helped it get 1.48 million total viewers outside of the US; most had expected just 1.25 million.
Netflix still predicted a dramatic shortfall in profit. Expressed in earnings per share, it only saw itself getting 36 to 70 cents per share versus the $1.16 it had just made. It also only saw a slight increase of between $841 million to $875 million in revenue where most had expected it to get $923 million.
Company chief Reed Hastings had admitted that the rapid and ill-received changes had "hurt our hard-earned reputation" and based the lessened hopes on an expected increase in the number of those axing their service. He still expected Netflix to be profitable. The company would turn to a loss in early 2012, when it planned to expand to Ireland and the UK, but it would freeze expansion as the focus switched to gaining more customers in existing areas.
The movie provider was confident in the long run as it saw a rapid switch to streaming for many of it users. Under half of those who used streaming also wanted DVD, and only seven percent of new streaming customers were picking DVD. While some of that was due to the price hike, it sat at 21.45 million streaming users versus 13.9 million on DVD, hinting that Internet viewing was now clearly the main format.
In a dig at Starz backing away from the service, it claimed that Starz was just a small six percent piece of actual viewing time and that Netflix had ten times as much content online, leaving Starz out of any direct conflict. Amazon Prime wasn't a threat as it had less content and was mostly shadowing Netflix, and Hulu Plus was focusing on recent TV shows and not the back catalog.
Its current and planned-for subscriber drops may still be comforts to Apple, which has been reclaiming share for iTunes, albeit mostly in the pay-per-show arena. Netflix before the latest results had 64 percent of paid Internet video in the US, according to NPD data, where Apple is estimated to have just a few percent.