Bleak outlook casts shadow on Netflix profit

SAN FRANCISCO – Netflix Inc. expects its profit to sag the rest of this year as the online DVD rental leader absorbs the cost of lowering the price of its most popular subscription plan to ward off an intensifying threat from rival Blockbuster Inc.

The bleak forecast overshadowed the Los Gatos-based company’s second quarter results, which also were released Monday after the stock market closed.

Netflix earned $26.6 million, or 37 cents per share, in the three months ended in June. That represented a 50 percent increase from net income of $17 million, or 25 cents per share, at the same time last year.

Revenue totaled $303.7 million, a 27 percent improvement from $239.4 million last year.

If not for a $4.1 million payment from Blockbuster to settle a patent infringement lawsuit, Netflix said it would have earned 31 cents per share. That was still well above the average earnings estimate of 23 cents per share among analysts surveyed by Thomson Financial.

But Netflix doesn’t expect the earnings momentum to extend into the second half of this year, largely because the company is lowering its monthly fees by $1 on its two most widely used services.

Netflix ended June with 6.74 million subscribers, a decrease of 55,000 customers from April.