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Netflix: Subs slow, shares slump, predicts HBO rival

October 24, 2012

Netflix shares slumped 16 per cent in after-hours trading in the US when it cut its guidance for full-year subscriber growth.

Netflix had a full-year target of seven million new subscribers to its US service. It revealed it had added 1.1 million new US streaming subscribers in the third quarter, taking it to 3.3 million for the year but cut the high-end of the range for the full year from seven to 5.4 million.

The company continues to add subscribers faster than its competitors – such as HBO, the pay-TV channel owned by Time Warner – but its guidance shook the market with the shares falling more than $11 to $57. At their peak last summer, the shares touched $300.

Netflix did hail its international expansion; it is pushing ahead with international expansion, adding 690,000 subscribers: it recently launched its streaming service in Scandinavia, where it will go head to head with a streaming-only service from HBO. The UK has been the source of most of its international growth, with Netflix overtaking LoveFilm, the Amazon-owned streaming service in subscriber numbers.

Reed Hastings, Netflix’s chief executive, warned in his letter to investors that he expected HBO to launch a streaming-only service in the US: currently HBO’s streaming package is only available to subscribers of its pay-TV service. “We think it will make strategic sense eventually for HBO to go direct to consumer in the US, and become more of a competitor to Netflix,” he said.



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