Subscriber losses drop Netflix stock 36 percent after Q3 report

Netflix (Nasdaq: NFLX) stock dropped 36 percent Tuesday morning, after the company said it lost more than 800,000 subscribers during the second quarter and that it expects to continue losing customers.

Snapshot of Netflix stocks in a.m. trading, Oct. 25. (FreeStockCharts.com)

Shares in Netflix were trading at $76.05 at 10:04 a.m. ET Tuesday, down $42.79, or 36.01 percent. The stock, which closed at a high of $298.73 on July 13, has been pummeled since July, when it first announced plans to raise subscription prices.

Netflix stock was trading at a new 52-week low on Tuesday. Once viewed as a serious threat the pay TV business of cable operators, telcos and satellite TV providers, Netflix is fighting to survive. The online video provider may find it difficult to return to the days of subscriber growth, as pay TV distributors and cable networks launch TV Everywhere sites that allow subscribers to watch video content on the Web and mobile devices.

Netflix ended Q3 with 23.79 million total U.S. subscribers. It counts 21.45 million streaming video subscriptions and 13.93 million DVD subscriptions. The company warned investors that it expects its DVD subscriber count to decline sharply during the fourth quarter, and that it expects the number of streaming video subscribers that are cancelling their subscriptions to decrease.

"This cancellation wave was triggered by the debit and credit card bills arriving with our new prices. The wave peaked a few weeks ago and cancellations are now steadily declining," Netflix said in its letter to shareholders.

Netflix also acknowledged in the letter to subscribers that it faces increased competition from TV Everywhere sites from pay TV distributors such as Comcast (Nasdaq: CMCSA) and Dish Network (Nasdaq: DISH), noting that it is more difficult to compete against TVE portals than it is individual TVE sites from HBO, ESPN and other programmers.

"It's slightly worse for us if the other primary applications are (electronic program guides) like DishOnline and (Comcast's) Xfinity, because we wouldn't be in those EPGs," Neflix said.

For more:
- see Netflix letter to shareholders (PDF)
- and the earnings announcement

Special Report: Netflix's fall from grace: Can it recover?

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