On the Call: Netflix CEO Reed Hastings

In Netflix's third-quarter earnings report, its predictions for year-end U.S. streaming subscriber growth was cut to around 5 million net additions, down from a best-case scenario of 7 million.

Third-quarter additions of 1.2 million were on the low end of the range of 1 million to 1.8 million additions that the company forecast in July. That led to the revision for an annual gain of between 4.7 million and 5.4 million. The company now expects to end the year with between 26.4 million and 27.1 million U.S. streaming customers by the end of the year.

The downward revision caused Netflix's stock to fall more than 16 percent in after-hours trading.

CEO Reed Hastings told analysts Tuesday that the prediction was the problem, not the company's performance.

QUESTION: What changed, as you moved through this year, that has caused you to miss your earlier guidance of 7 million net domestic streaming adds by so much?

RESPONSE: Well, we were within the range of our guidance from 90 days ago, but not within the annual guidance that we gave at the end of Q1. And you know, roughly, I think we're feeling our way along as the streaming market grows and we mis-predicted it. I would call it more of a forecasting error than anything else. When we think about growing five million net additions in this year, if we had predicted five million, I think we'd all be feeling good. That's great growth. So, you know, we own it in terms of a bad forecast but in terms of actual performance of the business, to grow five million net adds domestic is substantial and we feel good about that and about the growth next year.