Netflix cuts fourth-quarter forecast
August, September subscriber growth lags expectations
By Danny King -- Video Business, 10/6/2008
OCT. 6 | Netflix today reduced its fourth-quarter forecast for sales and subscribers after finishing the third quarter with about 100,000 fewer subscribers than it had previously estimated, citing tough economic conditions.
Netflix's fourth-quarter sales are now forecast to be as much as $359 million, down from $367 million, the company said in a statement today. The largest movie-rental service via mail finished last month with 8.67 million subscribers, less than the 8.78 million-subscriber midpoint of its forecast.
The rental market overall is flat year-to-date, but struggled in August and September, according to Rentrak's Home Video Essentials, which collects point-of-sale data from bricks-and-mortar and online rentailers, but not rental kiosks. DVD rental turns were down 9.4% in August compared to the same month a year earlier, and September rental turns were off 3.5%, according to Rentrak.
Netflix has been trying to boost subscribers by augmenting its by-mail service with an expanded inventory of titles through its video-streaming offering. Within the past two weeks, the company has announced agreements to stream content from Liberty Media's Starz movie channel, Walt Disney's Disney Channel and CBS.
"Net subscriber growth in July was in line with expectations, but August was unusually weak", Netflix chief financial officer Barry McCarthy said in the statement. "In September, the business regained momentum with results slightly below original expectations, likely due to the economic climate."
In May, Netflix introduced a set-top box allowing customers to stream from an inventory of what was about 10% of its 100,000 titles. Later that month, Netflix CEO Reed Hastings said products such as Netflix Player by Roku, which had to be back-ordered within three weeks of its introduction, would double the company’s subscriber base within a decade.
Shares of Netflix, which reports third-quarter earnings later this month, fell about 12% as of about 3 p.m. Eastern time today. The Nasdaq Composite Index was down about 5.4%, while the Dow Jones Industrial Average fellow below the 10,000 mark for the first time since 2004.
