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Analyst: Netflix to Post Sub Growth in Q3

9 Oct, 2007 By: Erik Gruenwedel

Online DVD rental pioneer Netflix Inc. is expected to rebound with subscriber growth in the third quarter (ended Sept. 30) following its first ever sub decline last quarter, said a Wedbush Morgan Securities analyst.

Michael Pachter, who last week estimated a 100,000 subscriber decline for Blockbuster Total Access in the third quarter, said he believes Netflix could possibly add the same number of subs to its base of about 6.7 million members.

Blockbuster ended the second quarter with 3.6 million online subscribers.

Pachter said Blockbuster Total Access' meteoric rise from 1.5 million subs to 3.6 million in less than a year was due to an aggressive and expensive marketing campaign ($300 million) the Dallas-based DVD rental giant recently put the brakes on.

The analyst said Blockbuster's marketing retrenchment, initiated after it lost $35 million in the second quarter, would benefit its rival.

Netflix, in turn, apparently upped its media marketing as evidenced by TV spots aired during the current Major League Baseball divisional playoffs.

“I think online rental sub growth is slowing, but not negatively,” Pachter said. “Netflix will grow this quarter.”

Citing a “quiet period,” Netflix spokesperson Steven Swasey declined comment on the company's media purchases and Pachter's projection. It reports third quarter results Oct. 22.

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