Netflix disappoints investors

NETFLIX, the top US video rental company, reported second-quarter revenue that fell short of expectations and saw shares drop with a caution that subscriber growth would slow in the third quarter.

The company said quarterly earnings rose to $68m (£41.8m), or $1.26 a share, from $38m, or 70 cents a share, in the same period a year ago.

Revenue rose 52 per cent to $788.6m, but fell short of the average analyst estimate of $791.5m, according to analysts.

It warned that it would add fewer US subscribers in the third quarter than it did in the period in 2010, worrying investors about slowing growth. Shares dropped around nine per cent in late trade.

Netflix, which recently secured the rights to stream hit US show “Mad Men” (pictured), defended its decision to raise prices on DVD and streaming movie bundles.

“It is expected and unfortunate that our DVD subscribers who also use streaming don’t like our price change, which can be as much as a 60 per cent increase,” Netflix said in its earnings release.

The company acknowledged some subscribers would cancel or downgrade plans, but expect most will keep its services.