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Netflix: Outage, economy ding subscriber growth

Netflix on Monday detailed its outlook for the third and fourth quarters, projected fewer subscribers than before and said its August outage cost it $6.5 million.
Written by Larry Dignan, Contributor on

Netflix on Monday detailed its outlook for the third and fourth quarters, projected fewer subscribers than before and said its August outage cost it $6.5 million.

The company said in a statement that its third quarter earnings will be "comfortably" within its targets, but said a one-time $6.5 million credit given to subscribers because of its August outage will hurt earnings. Add it up and Netflix says its revenue will be in the $343 million to $348 million range with earnings of 26 cents a share to 34 cents a share.

But the more interesting nugget in the Netflix statement is the projection for future subscribers. Netflix said it ended the quarter with 8.672 million subscribers, a tally that missed the company's range of 8.675 million to 8.875 million. In a statement, CFO Barry McCarthy said subscriber growth was on target in July, "unusually weak in August" and below expectations in September.

The August shortfall was most likely outage related, but Netflix noted that September's drop-off was most "likely due to the economic climate."

That outlook may indicate that Netflix is seen as a disposable service to cash-strapped consumers. A few more quarters of data will tell the tale.

In any case, Netflix expects the subscriber growth issues to continue. Netflix said it expects to have 8.95 million to 9.25 million subscribers at the end of the fourth quarter, down from 9.1 million to 9.7 million. Fourth quarter revenue will be $353 million to $359 million compared to the company's previous outlook of $357 million to $367 million. Net income will be 30 cents a share to 38 cents a share, up slightly from Netflix's prior outlook.

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