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Netflix misses subscriber target for third quarter

The video-rental service adds 1.2 million new U.S. subscribers in its third quarter, shy of the nearly 1.8 million it needed to hit its full-year target of 7 million.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
2 min read

Netflix added fewer streaming subscribers in the third quarter than it needed to stay on track to reach full-year growth targets, but the company's financial performance was in line with analyst expectations.

Netflix, the online movie-rental service, reported a third-quarter net profit of $8 million, or 13 cents a share, on revenue of $905 million, the company said after the close of trading today. Revenue was up 10 percent from the $821 million the company reported in the same period a year earlier.

Netflix said that for the quarter ending September 30, the number of U.S. streaming subscribers increased by 1.2 million. The company now has a total of 25.1 million domestic streaming customers.

CEO Reed Hastings said previously that the company needed to add nearly 1.8 million new U.S. streaming subscribers in the quarter to have a chance at making good on its goal of adding 7 million new customers for the year. The company now estimates it will see an increase of 5.4 million customers for all of 2012.

Investors have always looked at how proficient Netflix is at attracting new U.S. streaming users to determine the health of the company's business model. So, this latest quarterly performance didn't please Wall Street one bit.

In after-hours trading, Netflix shares were down $10, or 15 percent, to $57.98.

If you're keeping score, give the win this quarter to the Netflix bears on Wall Street. A couple of weeks ago, Netflix shares spiked on a lot of hopeful analyst reports based on some iffy metrics.

The Netflix skeptics countered with their own tea-leaf reading and the stock lost much of the earlier gains. The stock has gone up and down since but in this instance it was the doubters who were right.

Hastings had predicted that the Olympics, as well as the warm summer months, could dampen the public's desire to watch movies and sign up to Netflix.

But some investors aren't buying that excuse. They fear increased competition and Netflix's inability to renew licensing agreements for films from some of the top Hollywood studios is starting to hurt the company's attractiveness.

In his letter to investors, Hastings didn't offer much new in the way of an explanation for missing the subscriber mark. He's expected to be on a call with analysts starting at 3 p.m. PT.