M+E Daily
Netflix Lowers Subscriber Expectations for Discs-By-Mail, Streaming Services
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When Netflix announced its intention to split its discs-by mail and streaming video services in the U.S. into separate subscription plans, the company estimated that 3 million of its customers would subscribe solely to the discs-by-mail service by the end of the third quarter (Sept. 30). At the time, Netflix also said its newly created discs-by-mail division would help ensure that the company’s DVD business remained “as healthy as possible for as many years as possible.”
Today — two weeks after Netflix’s service changes and concomitant price increases went into effect — the company announced that it was lowering its starting subscriber expectations for its new discs-only service as well as its streaming-only plan in the U.S.
Netflix cut its end-of-quarter projection of discs-only subscribers by 26.7 percent, from 3 million to 2.2 million. The company also trimmed the number of U.S. subscribers projected to opt for its streaming-only service to 9.8 million, from an original expectation of 10 million.
Netflix still expects 12 million of its U.S. customers will subscribe to both its discs-by-mail and streaming services by the end of September. The company also left unchanged its financial guidance for the third quarter.
In a Sept. 15 note to shareholders, Netflix intimated that customer pushback on the price hikes prompted the company’s guidance revisions. In defending its splitting of services as “the right long-term strategic choice,” the company reiterated its four key objectives:
“(1) to create a dedicated DVD rental division that takes pride in great execution and maximizes the opportunity for disc rental over the coming decade;
“(2) to enable us to improve our global streaming service even more rapidly, because it is not meshed with a domestic DVD business;
“(3) to enable us, with the growth in revenue, to license more streaming content and thereby improve our streaming service even more;
“(4) to remain very price aggressive, with $7.99 per month for unlimited streaming of a huge library of TV shows and movies, and $7.99 per month for unlimited DVD rentals, 1 out at-a-time.”
Netflix plans to share more on its third-quarter performance in October.
More at All Things Digital and GigaOm.
