Netflix Expects Net Loss For 2012

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Netflix is continuing to lose customers in the fourth quarter -- after losing a record 800,000 net subscribers in Q3 -- and expects quarterly revenue to "relatively flat" through next year, leading the company to forecast a net loss for 2012.

The company disclosed the updated guidance in a Securities and Exchange Commission filing Monday regarding two financing deals through which it raised about $400 million in capital.

"We expect that consolidated quarterly revenue will be relatively flat until we can achieve positive net subscriber additions," Netflix said. The lack of top-line growth coupled with increased investment in expanding in international markets will result in a consolidated net loss for next year, it said.

On Monday, Netflix said it raised $200 million through the registered sale of common stock to certain mutual funds and accounts managed by T. Rowe Price Associates, and raised $200 million through the private placement of convertible notes to funds affiliated with Technology Crossover Ventures (TCV).

"With this additional capital from two long-term oriented investors, we have strengthened our balance sheet and remain focused on growing our streaming subscriptions and returning to global profitability after our launch of the U.K. in 2012," Netflix chief financial officer David Wells said in a statement.

Netflix lost a higher-than-expected 800,000 U.S. subscribers in the third quarter, after a disastrous marketing move to eliminate bundled DVD-plus-streaming plans. The change infuriated many customers, who suddenly found Netflix increasing monthly fees by as much as 60%. In announcing Q3 results, Netflix also lowered revenue and profit expectations for the fourth quarter, anticipating that it will lose at least 2.6 million DVD accounts in the period.

In the U.S., Netflix anticipates ending 2011 with 20.0 million to 21.5 million streaming subscriptions and 10.3 million to 11.3 million DVD subscriptions. That's compared with 21.5 million streaming and 13.93 million DVD subscribers at the end of Q3. Internationally, it expects to have 1.6 million to 2.0 million subs.

From the stock and equity deals announced Monday, Netflix estimates it will net approximately $397 million after deducting offering expenses. The company had $159.2 million in cash and equivalents at the end of Q3. Morgan Stanley and J.P. Morgan Securities are acting as joint book-running managers for the common stock offering, and Morgan Stanley is acting as the advisor for the convertible notes financing.

Separately, on Tuesday Netflix announced that its "Just for Kids" section is now available in the U.S. on the Nintendo Wii game console. The Just for Kids section provides a selection of TV shows and movies for children 12 and under, such as Disney Channel's Phineas and Ferb and Nickelodeon's Blue's Clues.

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