Netflix Lowers Subscriber Forecast

LOS GATOS: In the wake of separating its streaming and DVD-rental services, Netflix has lowered its third-quarter subscriber estimates, saying in a letter to shareholders that it does feel splitting the two was the "right long-term strategic choice."

The company expects to end the quarter with 21.8 million U.S. streaming subscribers and 14.2 million domestic DVD subscribers. This is down from its prior forecast of 22 million and 15 million, respectively.

In its letter to shareholders, Netflix said the strategy behind splitting the services is four-fold. It was firstly looking to create a dedicated DVD rental division to maximize the opportunity for disc rental over the coming decade. It also hoped to improve its global streaming service even more rapidly, since it’s no longer meshed with the U.S. DVD business. Thirdly, the split enables Netflix to license more streaming content, thereby improving the service. And lastly, to remain very price aggressive, with $7.99 per month for unlimited streaming and $7.99 per month for unlimited DVD rentals.

"We know our decision to split our services has upset many of our subscribers, which we don’t take lightly, but we believe this split will help us make our services better for subscribers and shareholders for years to come," the letter stated.