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Netflix's growth slows down just as HBO joins the streaming fight

Richard Lawler, @Rjcc
October 15, 2014
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Netflix is no longer an up and comer, it's a giant, pushing out well-regarded original content -- in 4K even -- and constantly expanding its reach. Today we learned that HBO will finally hop off its cable-only throne and do battle with some sort of internet-only service next year, and as Netflix reveals how it did in the last three months, we'll find out how it plans to respond. According to CEO Reed Hastings' Q3 letter to investors, despite the "inevitable" move, he believes "it is likely we both prosper as consumers move to Internet TV." Meanwhile, his company has grown to 53 million customers worldwide and figures it will crack 57 million by the end of the year. The bad news? Those price hikes for new customers appear to have slowed growth, with Netflix adding 980,000 customers in the US, lower than both the 1.29 million net additions in the same period a year ago -- when it passed HBO in paid subscribers -- and the 1.33 million the company predicted just three months ago. There should be plenty to talk about when Netflix has its investor call at 6PM ET (live video streaming -- watch it embedded after the break).

Between the slower-than-expected growth, a sharp drop in its free cash flow and the HBO news, financial outlets like Bloomberg report the prices of its shares have dipped in after-hours trading by as much as 22 percent. So what's going right for Netflix? Plenty -- Its profits are up (operating income nearly doubled from the same period last year, from $57 million to $110 million), it has the recent movie deals for Crouching Tiger and Adam Sandler, and the company says its new animated series Bojack Horseman is drawing more viewers than back-catalog series like Archer, Futurama or Bob's Burgers did in a similar period. Speaking of original content, Netflix's next new show Marco Polo (pictured above) will debut December 12th, and it has nine series currently in production.

Netflix says it's midway through switching to HTML5 for its desktop player, and that its set-top box player is ready to work on more cable boxes. While Virgin / TiVo were the first, it's "expanded to less high-end systems" -- could that mean Netflix on the cable box you already have? We'll have to wait and see, but for now its set-top box rollout is mostly in the new European territories. Netflix is still agitating against the Comcast / TWC merger for it to be blocked, or placed under restrictions protecting "strong" net neutrality, and the number of DVD subscribers shrank slightly, from 6.3 million to 6 million. We'll let you know if anything else pops up on the call at 6PM, which you can also watch right here.



In this article: earnings, hbo, hdpostcross, netflix, q3, q32014, video
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