The tough economy appears to be taking a toll on Netflix.
The online rental service, considered relatively impervious to economic downturns, said Monday that it fell short of its third-quarter subscriber forecast. Netco also lowered its fourth-quarter sales and subscriber forecasts, causing its stock to fall 8.6% to $26.49 at market close.
Chief financial officer Barry McCarthy said subscriber growth was unusually weak in August and fell slightly below expectations in September, “likely due to the economic climate.”
However, the Netco said it did expect third-quarter net income to fall within its guidance for the period of $16 million-$21 million. It said revenue was expected to land within its previous guidance of $343 million-$348 million excluding a onetime $6.5 million credit for an August service interruption.
Service ended the quarter with 8.672 million subscribers, slightly below its forecast of 8.675 million-8.875 million subs for the period. It will release its complete earnings on Oct. 20.
DVD rentals sagged overall in August and September, according to Rentrak’s Home Video Essentials, which collects point-of-sale data from bricks-and-mortar and online rentailers but not rental kiosks. DVD rental turns were down 9.4% in August compared with the same month a year earlier, and September rental turns were off 3.5%, according to Rentrak. It’s flat for the year, however, and some observers expect the economic crunch to boost rentals over sales. The impact on subscription services such as Netflix is harder to gauge.
Company’s revised guidance for the fourth quarter is 8.95 million-9.25 million subs, down from 9.1 million-9.7 million subs and revenue of $353 million-$359 million, down from $357 million-$367 million. It did not change its net income forecast of $18 million-$23 million.
Netco has been trying to boost subscribers by offering video streaming. In recent months it has inked deals with Microsoft’s Xbox Live service, CBS, Disney Channel and Starz Entertainment.