Netflix Shares Down as Subscriber Growth Slows

Netflix shares fell sharply in after-hours trading on Monday after the U.S. video giant fell short of revenue forecasts and said it expects slower U.S. subscriber growth this quarter.

Netflix shares were down 8.20 percent at $258.44 in trading following the closing bell on Wall Street.

Revenue rose 52 percent in the second quarter to $789 million, short of the $791.5 million expected by Wall Street analysts. Net profit was up 55 percent to $68 million.

Netflix chief executive Reed Hastings, in a letter to shareholders, said he expected a recent pricing change to result in some U.S. subscribers dropping the Internet streaming and DVD-by-mail service.

"Some subscribers will cancel Netflix or downgrade their Netflix plans," Hastings said. "We expect domestic net additions in (the third quarter) to be lower than the previous year."

He said he expected Netflix to have some 25 million total U.S. subscribers at the end of the third quarter -- about the same number it had at the end of the second quarter.

Netflix added 1.8 million U.S. subscribers in the second quarter.

Netflix announced two weeks ago that beginning in September, streaming and DVD-by-mail service that now costs subscribers $10 per month will jump to $16 monthly.

Hastings also said Netflix has made "great progress" on integrating with Facebook and it would probably be launched this quarter in Canada and Latin America.

He said the U.S. Video Privacy Protection Act (VPPA) currently discourages Netflix from launching a Facebook integration in the United States.

"Under the VPPA, it is ambiguous when and how a user can give permission for his or her video viewing data to be shared," Hastings said.

He said U.S. lawmakers were working on a clarification of the law that would permit Netflix to launch Facebook integration in the United States.