Netflix Profit Plummets 91%

Higher subscription costs hurt second quarter earnings
By Evann Gastaldo,  Newser Staff
Posted Jul 25, 2012 7:38 AM CDT
Netflix Profit Plummets 91%
This March 20, 2012 file photo shows Netfilx headquarters in Los Gatos, Calif.   (AP Photo/Paul Sakuma, File)

Apple isn't the only one who has hit a rough patch—Beleaguered Netflix is also taking a drubbing after posting a 91% drop in net income for the second quarter. Shares responded by dropping almost 15% in after-hours trading yesterday. The company’s decision to separate its DVD-by-mail service from its streaming service, thus increasing the subscription fee for customers who want both, ended up costing it 850,000 DVD-only subscribers in the second quarter in the US. Meanwhile, more than half a million US streaming subscribers came on board.

"Their subscriber gains just weren't impressive," an analyst tells the Wall Street Journal. Though Netflix was once again profitable, with a net income of $6.2 million after losing $4.6 million in the first quarter, a letter to shareholders warns that a number of challenges are ahead—including a return to the red in the fourth quarter. And more bad news: HBO quickly squashed the idea of a partnership that would allow Netflix customers to stream the network’s shows. Netflix CEO Reed Hastings had raised the idea of a partnership in the letter to shareholders, but HBO says no deal is in the works, Reuters reports. (Read more Netflix stories.)

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