Shares in Netflix (Nasdaq: NFLX) dropped more than 24 percent Wednesday, hours after the top online video provider said its subscriber growth could be impacted during the third quarter by coverage of the 2012 Summer Olympics by Comcast's (Nasdaq: CMCSA) NBCUniversal networks.
While Netflix reported late Tuesday that it picked up 530,000 U.S. streaming video subscribers, the company told analysts that it faces stiff competition from subscription based TV Everywhere packages from cable and satellite TV providers. CEO Reed Hastings said the wall-to-wall coverage of the Olympics on TV will sap the amount of time viewers spend watching Netflix content.
"People are viewing the Olympics impartially instead of Netflix … during those 10 or 14 days, people are shifting consumption there," CEO Hastings told analysts.
Netflix has increased its investments in developing original programming to help it compete with premium cable networks such as HBO. But Hastings said that the company wants to work with HBO, suggesting that Netflix hopes to license content from HBO similar to the deals it has struck to offer previous seasons of series from cable networks such as AMC.
"While we compete for content and viewing time with HBO, it is also possible we will find opportunities to work with other networks," Hastings wrote in his letter to shareholders.
Netflix continues to struggle to maintain subscribers of its DVD rental service, losing 850,000 DVD subscribers during the second quarter. The company told analysts that it expects to have 8.35 million to 8.65 million DVD subscribers at the end of the third quarter.
Netflix predicted that it will count a total of 24.9 million to 25.7 million domestic streaming video subscribers at the end of the third quarter, giving analysts a range of 800,000 subscribers.
Netflix generated 889.2 million in revenue during the second quarter, up about $100 million compared to this time last year. It posted $6.2 million (11 cents per share) in net income, down from net income of $68.2 million ($1.30 per share) during the second quarter of 2011.
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