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Netflix earnings, revenue soar

October 21, 2008|The Associated Press

Netflix Inc.'s third-quarter profit surged 30% amid slowing subscriber growth that's turning into a bigger problem for the online DVD rental leader as the rapidly unraveling economy prods more consumers to clamp down on entertainment expenses.

To help boost its revenue, the Los Gatos, Calif.-based company said it would begin charging about 500,000 subscribers $1 more per month to rent high-definition DVDs made for Blu-ray players. The surcharge becomes effective Nov. 5.

As the prices of Blu-ray players continue to fall, Netflix is betting that more of its subscribers will buy the high-definition gadgets. That would create more opportunities to raise rates as the company braces for the second recession since its inception a decade ago.

Netflix earned $20.4 million, or 33 cents a share, for the three months that ended in September, compared with $15.7 million, or 23 cents, a year earlier.

Revenue increased 16% to $341 million.

Analysts polled by Thomson Reuters had projected a profit of 31 cents a share on revenue of nearly $343 million.

Netflix ended the period with 8.67 million subscribers, falling below the goals that management established in July when executives forecast the rental service might enter October with 8.8 million. The company had warned two weeks ago that it misgauged its subscriber growth.

Netflix shares gained 20 cents in extended trading after ending the regular session at $23.80, up 50 cents.

Despite the daunting economy, Netflix maintained its earnings outlook for the remainder of the year. That's an indication that management believes it can retain most of its existing customers while cutting some costs, including the amount it spends to attract new customers.

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