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Netflix stumbles as profit warning spooks investors

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By John Glenday | Reporter

October 16, 2014 | 2 min read

Online streaming service Netflix has suffered a flight of capital after a profit warning sent investors into a panic with shares dropping 26 per cent to $330.

The previously booming service conceded that it had signed up fewer new subscribers than expected in the third quarter following a $1 US price increase to $8.99 a month, sharply reducing earnings estimates for the fourth quarter.

Whereas previously Netflix had estimated enticing 3.7m new subscribers to its fold it actually managed just 3m, casting doubts on the entertainment providers ability to convince 4m new subscribers to sign up in the next quarter.

To compound Netflix’s misery HBO announced it would soon enter the streaming video market with a service of its own to give people without cable or satellite subscriptions access to its back catalogue; including Game of Thrones and Boardwalk Empire.

Reid Hastings, Netflix chief executive, admitted: “This quarter we over-forecasted membership growth. Slightly higher prices result in slightly less growth.”

Commenting on HBO’s entry Hastings added: “It was inevitable and sensible that they would eventually offer their service as a standalone application. Many people will subscribe to both Netflix and HBO since we have different shows, so we think it is likely we both prosper as consumers move to internet TV.”

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