Netflix Doesn't Have Enough Subscribers

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Compared to this time last year, when Netflix lost 800,000 subscribers following a price hike, the streaming service looks like a success story, adding 1.16 million new users this quarter. But that's not how Wall Street feels, which has the company's stock down almost 17 percent following its earnings report. That's because Netflix isn't living up to its potential. The company had promised 7 million new subscribers this year. The third quarter number puts it up to 3.43 million, and the company is lowering expectations for Q4. 

The Internet television watching world has changed over the last year, and not in Netflix's favor. Besides tarnishing its brand by raising prices and attempting to separate its mail-in rental service into something with the horrible name Qwikster, Netflix now has more competition. CEO Reed Hastings understands that, which is why he mentioned in the earning's release that it has unique offerings. "Of our top ten TV shows, six are only on Netflix, and not available on Hulu, Amazon Prime Instant Video, or HBO GO. The ratio is slightly higher for our top 50 TV shows. We have a very unique and compelling offering,"  he said. But he's less cheery about his lead than he was during last quarter's earnings report, notes Peter Kafka at AllThingsD. Back then he said, "We have yet to see Hulu Plus or Amazon Prime gain meaningful traction relative to our viewing hours." Today he called Hulu "our closest competitor" following that up with this: "Our estimate is that viewing of Amazon Prime Instant Video has yet to pass that of Hulu," making it sound like Hulu has gained on Netflix. 

This article is from the archive of our partner The Wire.