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Analysts call foul on Olympics scapegoating by Netflix

A number of analysts have told financial information provider SNL Kagan that they have strong doubts over Netflix’s recent claim that the lower subscriber additions it expects for the third quarter of this year can be attributed to the London 2012 Olympics.

Netflix CEO Reed Hastings and CFO David Wells told shareholders in a recent open letter that they expect the company to struggle to achieve the high end of its quarterly target of 1mn to 1.8mn new subscribers in the third quarter of this year, as the Olympics will draw people away from the VOD-only service and towards linear television.

However, some analysts have dismissed these claims, with Dan Rayburn of StreamingMedia.com and Eric Wold of B. Riley & Co. telling SNL Kagan that it is more likely due to simple competition from rival services such as Hulu, Amazon Instant Video, Apple iTunes, DISH Network’s Blockbuster @Home, Comcast’s Streampix and Microsoft’s Zune video service for the Xbox.

Meanwhile, US research firm The Diffusion Group has released new research which indicates that Netflix is experiencing a significant decline in satisfaction among its streaming users: in mid-2011, two-thirds of Netflix streamers were highly satisfied with the service, while today less than half are highly satisfied, a decline of 29% in just 12 months.

“The impact of its ill-conceived price and packaging change of late 2011 continue to resonate today,” said Michael Greeson, TDG Founding Partner and Director of Research.

“While declines of this magnitude should be of concern to investors and subscribers alike,” adds Greeson, “it is important to note that the shift appears to have been from ‘highly satisfied’ to ‘neutral’, not to ‘highly dissatisfied’.”

Despite all the above however, Netflix does remain the poster boy of the subscription VOD scene, in the US at least: it had reached 23.9mn domestic subscribers for its streaming video services by the end of June, and continues to grow its international services as well (more details here).

“Let’s be clear: connecting one’s TV to the Internet is now a mainstream phenomenon,” said Greeson. “Unlike the early days, Netflix must compete with a variety of streaming services, including big brands such as Amazon and Wal-Mart (Vudu), studio-funded efforts like Hulu Plus, and expanding operator video-on-demand services. Netflix’s early mover advantage is quickly evaporating, and unfortunately at the same time service satisfaction is declining.”

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