Netflix shares slip as spending weighs on profits

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Netflix shares swung lower Thursday as spending at the leading streaming television service weighed on quarterly revenue that fell slightly short of expectations.

Netflix shares sank two percent to $345.84 in after-market trades that followed release of earnings figures that showed the Silicon Valley company logged profit of $134 million on revenue of $4.2 billion in the final three months of last year.

That compared with a profit of $186 million on revenue of $3.3 billion in the same period the prior year. Netflix ended the year with 139 million paying members worldwide, up 29 million from the start of the year.

Operating margin – the money a company keeps after expenses – shrank to 5.2 percent from 7.5 percent in a year-over-year comparison of quarters. The company said it had expected its margin to dip because of the number of shows that launched in the quarter.

“Our multiyear plan is to keep significantly growing our content while increasing our revenue faster to expand our operating margins,” Netflix said in a letter to shareholders released along with the earnings report.

Over the past quarter, Netflix said it added 8.8 million new subscribers at the end of last year, with 7.3 million of those outside the US. Netflix unveiled plans Tuesday to boost prices for US subscribers as it faces increasing competition in the streaming television market.

The California-based company will raise the price of its most popular streaming plan with high-definition video by 18 percent to $12.99 per month. Netflix will also be boosting prices of some other subscription plans and will apply those rates to Latin America and Caribbean countries where it bills customers in US dollars.

The company has been investing heavily in original content including hit shows like Stranger Things, The Crown and Orange Is The New Black, as it faces competition from the likes of Amazon and Hulu, and new offerings from traditional media giants such as Disney, CBS, and a newly announced plan from Comcast-owned NBCUniversal.

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