Straight to DVD for Netflix as shares tumble

Netflix is continuing to march on the streaming market - although profits have failed to meet expectation. At least Yahoo is in the same boat...

by Gabriella Griffith
Last Updated: 16 Oct 2014

No one could accuse Netflix of resting on its laurels. The TV streaming colossus has ploughed ahead with its plans for world domination, making history by releasing its own native content (notably House of Cards featuring Kevin Spacey) and has grown revenues by a fifth in the second quarter to £700m. But for shareholders, it just hasn’t been enough.

Investors had high expectations for new subscriber numbers, but the 630,000 new customers Netflix added in the US last quarter was 100,000 fewer than expected. Cue share price tumble – they fell by 7.2% in after-hours trading.

Chief executive Reed Hastings brushed off criticism in a video conference call to discuss the quarterly results.

‘We’re feeling quite good about the business,’ he said.

New subscriptions to the streaming service experienced a surge following the release of the latest series of Arrested Development, a Netflix exclusive.

But in an obvious attempt to manage the expectations of its jumpy investors, chief financial officer David Wells warned them not to expect the same from the service’s other exclusives:
‘This show [Arrested Development] already had a strong brand and fan base, generating a small but noticeable bump in membership when we released it.
‘Other great shows don’t have that noticeable effect in their first season because they are less established,’ he wrote.

No doubt he’s got this fingers and toes crossed hoping more exclusive shows such as The Following, featuring Kevin Bacon, inspire a spike in their own ‘following’.

Meanwhile over at internet confusoid Yahoo (MT still isn't sure what exactly it does these days) things are looking unsettled.

Third Point, the hedge fund headed by billionaire investor Daniel Loeb – one of the people instrumental in Marissa Mayer’s hiring – is offloading 40 million shares.

Yahoo has agreed to buy back the Third Point shares, reducing the hedge fund’s stake in the company to 2%. Shares in Yahoo have risen more than 70% since Mayer took the helm last year, although Leob’s move has sparked rumors the share price has reached its peak and analysts believe other shareholders could follow suit and cash in while the price is good.

Yahoo has agreed to pay $29.11 per share to Third Point, making their deal worth an eye-watering $1.16bn (£750m). Leob has resigned from the internet giant’s board.

‘I'm confident that with Marissa at the helm and her team's focus on innovation and engaging users, Yahoo has a bright future.’ Mr Leob said in a statement. Hmm, actions speak louder than words mate.

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