Tuesday, October 21, 2008

Netflix Lowers Expectations for Subscriber Growth

Investors retreated from Netflix today, after the movie-rental company reduced its expectations for subscriber growth for the final quarter.

 Netflix , which rents movies through mail, projected a total of 8.85 million to 9.15 subscribers by  the end of the fourth quarter, but that projection is 100,000 lower than its Oct. 6 estimate. Forbes attributed Netflix's downgraded forecast to a reduction in consumers' discretionary spending and other factors, such as "Rising food and gas costs". The article also quoted Youssef Squali of Jefferies & Co. who said:

The weakening economy is taking a toll on Netflix as consumer spending on this discretionary service is cut

When you consider Forbes' and Squali's reasons, there are flaws in their logic. Think of their reasons and compare it to your own budget. If you don't want to waste gas, wouldn't you much rather watch a movie that was delivered to you, than drive to the theater or rental store?As food costs rise, families are more likely to stay rather than spending $150 for a trip to Outback Steakhouse and six tickets to the latest flick at the local theater. Instead, a "family night in" seems like much more frugal option. You can save all of that money with a home-cooked meal capped by a movie rental that's already paid for.

I'm a Netflix subscriber and on Tuesday's I've searched Netflix's collection for a new release DVD to watch with friends during the next weekend. Apparently, Netflix's alliance with Starz ,which added 2,500 new titles to stream in "Watch Instantly" mode, didn't  attract the amount of new subscribers they desired.

Posted By Matt O'Hern at 04:19 PM
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