Fri, Jan 27, 2012 - Page 5 News List

Netflix gets a lift as majority of its customers return

ADVANCE:The uptick in customer numbers should help bolster confidence in CEO Reed Hastings, whose decision to raise prices last month battered the stock

AP, San Francisco

Netflix has regained almost as many customers as it lost following an unpopular price increase, signaling that the video subscription service is healing from its self-inflected wounds.

Fourth-quarter figures released on Wednesday show Netflix Inc ended December with 24.4 million subscribers in the US, up from 23.8 million at the end of September.

That gain of about 600,000 customers compares with the loss of 800,000 subscribers last summer after it raised its US prices as much as 60 percent.

The uptick is a positive sign for Netflix after several months of upheaval battered its stock. The shares reversed course on Wednesday, surging nearly 16 percent.

The fourth-quarter performance should help bolster confidence in Netflix chief executive officer Reed Hastings, who was skewered in Internet forums and analyst notes for miscalculating how subscribers would react to higher prices.

A contrite Hastings had promised that Netflix would lure back customers, and so far it has been even more successful than he forecast.

“You are never as smart or dumb as they say,” Hastings said in an interview on Wednesday.

“We know we are just beginning to climb back in terms of consumer trust and affection,” he said.

The fallout from the earlier customer defections contributed to a 14 percent decrease in Netflix’s fourth-quarter earnings.

Netflix made US$40.7 million, or US$0.73 per share, in the final three months of last year. That compares with income of US$47.1 million, or US$0.87 per share, a year earlier.

Investors had been bracing for a bigger drop-off. Analysts polled by FactSet had forecast fourth earnings of US$0.54 per share.

Revenue climbed 47 percent from the previous year to US$876 million — US$19 million above analyst projections.

“It’s still too early to know how much success Netflix is going to have this year, but seeing those gains in customers makes investors feel safer,” Frost & Sullivan analyst Dan Rayburn said.

Now that the backlash over the higher prices has eased, Netflix’s biggest challenge may be fending off competitive challenges to its primary business of streaming video over high-speed Internet connections. Inc is rapidly expanding a streaming service it started last year, while many analysts are expecting Verizon Communications to get into video streaming later this year, possibly in a partnership with Coinstar Inc’s Redbox, whose kiosks already compete against Netflix in DVD rentals.

Google Inc’s YouTube is also supplementing the amateur video on its site with more content from movie and TV studios.

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