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Netflix gains fewer new subscribers than expected

Netflix gains fewer new subscribers than expected
Michelle Yeoh in a scene from "Crouching Tiger, Hidden Dragon: The Green Legend," Netflix's planned first original movie. (Rico Torres / AP)

Streaming video company Netflix added fewer subscribers than expected in the third quarter as U.S. member growth slowed.

About 3 million people became new Netflix subscribers around the world in the three months that ended Sept. 30, the company said Wednesday. That's below the 3.69 million the company forecast in its prior earnings statement. 

Shares fell more than 25% in after-hours trading.

In the United States, the Los Gatos, Calif., company added 980,000 new members, compared with its projection of 1.33 million. During the third quarter of 2013, 1.29 million members signed up.

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Netflix, in a letter to shareholders, attributed the slow-down to increased monthly fees for new members.

"As best we can tell, the primary cause is the slightly higher prices we now have compared to a year ago," the company said. "Slightly higher prices result in slightly less growth, other things being equal, and this is manifested more clearly in higher adoption markets such as the US." 

The company has been betting on original shows, including the women's prison drama "Orange is the New Black" and the Kevin Spacey political series "House of Cards," to help bring in new users. With those shows, it makes whole seasons available at once, rather than making viewers wait a week for each episode. 

Having made its mark in the television industry, Netflix wants to extend its clout to feature films. On Oct. 2, it announced a deal with Adam Sandler to make four movies starring the comic actor. Earlier that week, it revealed a pact with independent studio The Weinstein Co. to finance a sequel to "Crouching Tiger, Hidden Dragon."

The "Crouching Tiger" follow-up will debut on Netflix on the same day it opens in certain Imax theaters next year, the companies have said.

Netflix has been making a major push to expand overseas. Last month the service became available in six European countries including France and Germany.

The firm posted a profit of 96 cents a share in the third quarter, an increase of 85% compared with the same period last year.

Revenue grew 27% to $1.409 billion.

Netflix reported earnings after the close of trading on Wall Street. The shares fell slightly to $448.59 a share on Wednesday.

The earnings report came on the same day that Time Warner Inc.'s HBO premium cable network said it plans to launch a version of its Internet streaming service that will be available to people who don't pay for a TV subscription.

Currently, the network's HBO Go service allows cable bundle customers to watch shows like "Game of Thrones," "Veep" and "Silicon Valley" on computers and mobile devices.

"That is a large and growing opportunity that should no longer be left untapped," HBO chief executive Richard Plepler told investors. "It is time to remove all barriers to those who want HBO."

Follow Ryan Faughnder on Twitter for more entertainment business coverage: @rfaughnder

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