Video subscription provider Netflix, Inc.(NASDAQ:NFLX) on late Tuesday reported a 91 percent drop in net income in the second quarter, as
rising license fees and growing competition squeezed margins, but still above
analyst estimates.
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Netflix earned $6.2 million, or 11 cents per share, in the
June quarter on revenues of $889 million, a rise of 13 percent from a year
earlier.In the year-ago quarter the company had earned $68 million, or $1.26
per share. However its performance was a slight improvementfrom the first
quarter when it had reported a loss of $4.6 milliondue to costs associated with
expanding in the United Kingdom. Analysts had forecast earnings at 4 cents a
share.
Netflix's stock fell $20.11 to $60.25 in Wednesday’s session
and made multi year low of $59.20.
Netflix charges its subscribers just $8 a month for
downloading unlimited content, though its acquisition costs have gone up with
television and film studios demanding more money for using the rights to their
content.The company was also hit by a sudden dip in subscribers, who were
angered when the company raised its prices a year ago by 60 percent.
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In the June quarter the company added 420,000 subscribers in
the U.S. compared to the 1.8 1.8 million U.S. subscribers it added in the
year-ago quarter. Netflix has admitted that Summer Olympics in London, starting
on Friday, could pose stiff competition to increasing its subscriber base.
The company stuck to its earlier predictions of posting a loss
for the year, as it spends more in expanding into markets outside the U.S. The
company posted a loss of $89 million from its overseas operations.
The company has also warned of continuing challenges ahead
and asked investors to brace for “ups and downs” as it pioneered internet
television.
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