Joseph O'Halloran ©RapidTVNews | 16-09-2011

In another of a series of recent blows Netflix’s senior management has warned shareholder that the company will see a drop in subs, the first fall the hitherto online video darling has experienced since 20007.

In a letter to shareholders, CEO Reed Hastings and CFO David Wells revealed that contrary to the guidance issued on 25 July, Netflix is lowering its expected Q3 2011 domestic subscriber estimates.

Specifically, it reveals that while streaming customers will be more or less the same as before - 9.8 million rather than 10 million - DVD-only customers will be 800,000 less than previously thought. Financial guidance for the quarter is unchanged, as is international subscriber guidance.

Two months ago Netflix separated streaming video and DVD-by-mail into two distinct services, and raised basic tariffs. The move was widely criticised within the industry and just as the new price tariffs kicked in, customers of the over the top (OTT) provider were dealt another blow with the news that Starz Entertainment had ended contract renewal negotiations, pulling the on supplying premium movie and original programming entertainment from Walt Disney and Sony Pictures.

Undimmed by the moves, Hastings and Wells said in a statement: “Despite the guidance revision, we remain convinced that the splitting of our services was the right long-term strategic choice….We know our decision to split our services has upset many of our subscribers, which we don’t take lightly, but we believe this split will help us make our services better for subscribers and shareholders for years to come. “