Why Netflix's earnings show fears it would kill TV were wrong

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Fears of TV’s death at the hands of Netflix have been greatly exaggerated. That’s the view of a UK analyst following Netflix’s disappointing second quarter earnings on Monday.

After Netflix added 1.5 million subscribers internationally, which was below Wall Street forecasts of 2.15 million, Liberum said in a note to clients it does not see Netflix posing a “real threat” to free-to-air broadcasters in Britain, such as the BBC and ITV.

The analysts added: “The disappointing subscriber uptake suggests that Netflix might have reached a saturated market and as such should bode well for broadcasters.”

Liberum said the results should also provide some “relief” for pay-TV operators, including Rupert Murdoch’s Sky and Virgin Media. Netflix, Liberum said, has still had to raise prices in the UK and has not been helped by its easy cancellation functionality.

Netflix’s shares tumbled 16% on the back of Monday’s earnings. This was despite the company’s revenue hitting $2.1 billion (£1.6 million), which was up 31% year-over-year and in line with Wall Street forecasts.

Analysts at Nomura said in a note that Netflix’s revenue increase was encouraging.

“We believe the market under appreciates the revenue growth the company is showing from recent price increases,” it said. “Moreover, Netflix reported contribution profit and operating income above expectations due to revenue growth exceeding expense growth.”

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