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Friday 23 February 2018

Poor subscriber numbers result in shares slump for Netflix

Kevin Spacey as a US congressman in a scene from the Netflix series House Of Cards (AP/Netflix, Melinda Sue Gordon)
Kevin Spacey as a US congressman in a scene from the Netflix series House Of Cards (AP/Netflix, Melinda Sue Gordon)

Katherine Rushton

As expected, Netflix grew revenues by a fifth to $1.07bn (€811m) in the second quarter, but shares in the online television and film provider plummeted in after hours trading, after subscriber numbers missed analysts’ forecasts.

The company has been the best performing stock on the Standard & Poor’s 500 index over the last year, following a series of hits such as The Following, pictured, starring Kevin Bacon, and the Emmy-award winning political thriller, House of Cards.

However, investors fear that the company’s critical acclaim may not translate into a financial return after it added 630,000 new customers in America, bringing its total customer base to 29.8m – some 100,000 fewer than expected. The shares fell by as much as 7.2pc in after-hours trading.

Chief executive Reed Hastings brushed off the share sell off, saying that Netflix’s stock has always been “volatile” because of its “aggressive” strategy to plough domestic profits into international growth.

At the start of last year, Netflix launched in the UK, where it is mounting a serious challenge to the likes of BSkyB.

Mr Reed and his colleagues avoided giving detailed numbers for individual shows during an awkward investor call, streamed over YouTube and hosted by a television interviewer.

However, they said that people could tell that their shows were hits because they are talked about in coffee shops, and pledged to continue in investing in original programmes. “We’ll do more and more content that is exclusive to Netflix,” Mr Reed said.

Meanwhile, according to recent research by Netflix, many Irish internet customers now have slower broadband streaming speeds than they did a year ago.

It found just one out of six Irish broadband providers achieved the company's recommended 2Mbps streaming speed measurement mark this year compared to two out of six last year.

Speaking to Morning Ireland earlier Minister Pat Rabbitte said that he hopes to use proceeds from Bord Gais energy division sale to inject into Ireland’s economy, particularly in the digital arena.

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