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Netflix profit shrinks in wake of price, Qwikster fiascos

updated 04:55 pm EST, Wed January 25, 2012

Netflix Q4 2011 buoyed by US, hurt elsewhere

Netflix saw the fuller consequences of its more controversial decisions on Wednesday with results from the fall. The company added more streaming customers than it expected, 220,000, but the "continued impact" of its price hike for those keeping DVDs and streaming led to it shedding 2.76 million disc subscriptions. These, along with the costs of expansion outside of the US, dragged Netflix's profit down 13 percent year over year to $41 million.

No mention was made of the Qwikster flip-flop, which has been widely blamed for alienating some customers.

The dip came in spite of revenue being up 47 percent year-to-year to $847 million and hitting an all-time high. Netflix also anticipated that its further international expansion, mostly for the UK and Ireland, would already turn it to a loss of between $9 million to $27 million. DVD income would similarly continue to sink faster than streaming would climb. A burst of content deals in early 2012 would also affect results.

Even with its current negative outlook, Netflix still saw itself as having little direct competition. To the service, the real threats weren't Amazon Instant Video or Hulu Plus. Netflix expected an Amazon service spinoff that would undercut it in price but also have less content, while Hulu Plus still had ads and was focused more on recent TV.

Most competition came from Internet-as-a-bonus video services like TV Everywhere that provide TV show access online for those who can prove they're existing cable subscribers. Providers were already willing to license each other's content and could create catalogs similar enough. "In that sense, we are just another network competing for viewing time with, and licensing content from, other networks," Netflix said.

The streaming video service is still the current frontrunner in Internet video in the US, with NPD data usually showing it at nearly two thirds of access and eclipsing pay-per-show services like iTunes.

by MacNN Staff



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