Netflix Continues to Reel, Losing 800,000 Subscribers

Serious setbacks continue to plague popular video provider Netflix, which has lost 800,000 subscribers in Q3 2011, the largest audience drop ever in its history, even as earnings have simultaneously risen by 65 percent. Per The New York Times, the streaming video service, which recently axed plans for spin-off DVD-by-mail service Qwiskter, continues to reel from growing competition, poor business decisions and negative publicity following recent 60 percent price hikes.

Previously expected to lose 600,000 subscribers based on internal forecasts, the Los Gatos, CA.-based movie and TV rental provider saw its audience shrink from 24.6 to 23.8 million from June to September, according to a just-released earnings letter. The company's share price plunged by roughly 27 percent in the wake of the announcement, which has spooked investors, who, like industry insiders, expect even more viewers to cancel subscription plans going forward. Despite growing ubiquity as a streaming provider on multiple set-top and mobile electronic devices, the firm itself projects a drop of several million combined subscribers from its online video and, primarily, DVD-by-mail plans by year-end.

Ironically, company revenues have at the same time grown beyond analyst expectations, with the firm earning over $62 million, or $1.16 per share, in the third quarter, beating its performance during the same time period in 2010. But the company has also warned shareholders that it may be unprofitable in coming quarters starting in 2012, as it continues its expansion into international markets such as the U.K. and Ireland.

Such issues are becoming growingly routine for Netflix though, whose luster has dulled following the splitting of its streaming video and disc-by-mail plans and corresponding price hikes, which went over poorly with customers and critics alike. Coupled with TV and movie providers like Starz recently announced plans to abandon the service, given Hollywood’s fears that it lets fans avoid paying a premium for video, it's led many supporters to pull the plug on their subscription. Growing competition from rivals like Hulu, Amazon, Google, Vudu and Redbox also threatens to undermine the company's category-leading position.

Continuing to bleed subscribers and serve as a perennial punching bag for the online peanut gallery, insiders privately question when, or if, Netflix can regain lost ground, let alone before competitors establish a permanent beachhead.

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