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Netflix misses quarterly subscriber numbers (Can you say recession?)

October 6, 2008 |  2:58 pm

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The chaos on Wall Street and concern on Main Street are reverberating online.

Netflix Inc., the Los Gatos, Calif., company that provides movies by mail and online, said today that it failed to meet its subscriber growth projections for the third quarter. It also scaled back its estimates for the end of the year.

"Net subscriber growth in July was in line with expectations, but August was unusually weak," Chief Financial Officer Barry McCarthy said in a statement. "In September, the business regained momentum with results slightly below original expectations, likely due to the economic climate."

Michael Pachter, an analyst with Wedbush Morgan Securities, said although the Olympics may have drawn away some viewers in August, consumers appear to be reacting to news of bank failures and the credit crisis.

"The average consumer couldn't help but be scared in the month of September, with all that’s going on," Pachter said. "Even though Netflix is a very low-cost way to watch movies, it’s still hard to commit (to a monthly subscription) if you’re not absolutely secure you're going to have an income, have a job."

Netflix said it ended the third quarter with about 8.672 million subscribers, below its previous guidance of 8.675 million to 8.875 million subscribers. That nonetheless represents a 23% gain from the same time last year, when it had a little over 7 million subscribers. The company expects to end the year with 8.95 to 9.25 million subscribers, down from earlier estimates of 9.1 to 9.7 million.

Net income is expected to be comfortably within the company's previous guidance of $16 million to $21 million, or earnings per share of 26 cents to 34 cents.

-- Dawn C. Chmielewski

Photo credit: Paul Sakuma / Associated Press

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