2.9 Million Reasons for Netflix to Worry

You rarely find breaking news at the bottom of a press release, but there's something peculiar about Netflix's (NAS: NFLX) press release this morning detailing a new overseas content licensing deal.

See, Netflix press releases now refer to the company as serving "more than 20 million streaming members in the United States, Canada, and Latin America." Less than a month ago, it was still referring to itself as serving "more than 25 million members" in those regions.

Netflix hasn't shed 5 million subscribers since the end of its third quarter. Well, at least we can hope that's the case. The key difference between the two corporate descriptions issued just three weeks apart is that Netflix is only referring to "streaming" customers now. Qwikster's dead, but the company still wants to get the world to rally around Netflix as the premier brand in video streaming. Don't you mind those red mailers behind the curtain.

Hold on to that "phew," though.

Leaving out the small number of domestic users exclusively on DVD-by-mail plans isn't a large subtraction problem. Netflix still had 22.93 million streaming subscribers at the end of the third quarter. Why is it simply drawing the line at "more than 20 million" on that front? Where have the 2.9 million extra subscribers gone?

Even Netflix doesn't know when the migration madness will end
It's easy to see why Netflix is playing it safe. The last thing it wants to do is brag about, say, "more than 22 million streaming members" in today's press release, only to whittle it down to 21.5 million when it inks another content deal next week.

The rub here is that Netflix did issue pretty specific guidance for how this quarter will play itself out on the streaming front. It saw an ugly October, as shocked subscribers canceled after seeing the dual-plan hikes on their September billing statements. It saw a flat November, followed by a "strongly positive" turn in December.

In other words, we should be done with the streaming defections -- assuming that there isn't a problem with its nascent overseas Web-served platform. Netflix's guidance last month calls for streaming subscribers to clock in between 21.6 million to 23.5 million by the end of this quarter.

The obvious answer is that it's simply leaning on a round "more than 20 million" sum to cover everything up to the 25 million milestone, but it's not as if the company has shied away from more specific descriptions before.

"More than 23 million members," reads a few of its springtime press releases.

I may be making mountains out of molehills, but remember this if Netflix somehow falls short of its late October guidance. Even Netflix tried to warn you.

Let's close on some good news
Now let's get to the rest of this morning's otherwise positive press release.

Content is king, even in a country watched over by a queen.

Netflix continues to build up its streaming licenses ahead of next year's launch in the United Kingdom and Ireland, inking a multi-year deal with Miramax.

Financial terms of the deal aren't being disclosed, but it will kick in as soon as Netflix debuts the streaming service early next year. Miramax has wasted no time getting busy on the digital front since buying its freedom from former parent Disney (NYS: DIS) . It struck a stateside streaming deal with Netflix in May, following that up with a similar deal through Hulu.

There may only be so many times that one can stream Miramax classics including Finding Neverland and Kate & Leopold, but Netflix has already announced content deals with MGM and Lionsgate (NYS: LGF) . In other words, it's not holding back in the U.K., where Amazon.com's (NAS: AMZN) Lovefilm is the well-entrenched favorite.

Lovefilm is a more of traditional mail-based DVD service, but it has been ramping up its streaming component.

The streaming battle intensifies
Netflix can use the overseas growth to offset weakness closer to home. Canada, Latin America, and now the U.K. and Ireland will only know Netflix as a streaming service at a set price point. There have been no price hikes. There have been no audience-rattling plans to split its service in two.

I'm still clinging to my Netflix shares, though my faith has certainly been rattled. Amazon is taking advantage of the situation by quickly building up its video smorgasbord -- available to Amazon Prime members at no additional cost -- up to 13,000 titles. DISH Network's (NAS: DISH) Blockbuster finally introduced an unlimited streaming service, but it's only available to DISH customers at an additional cost.

Everyone's watching Netflix, with a lot of those in attendance rooting for it to fail. This is why a simple change in description -- going from "more than 25 million members" to "more than 20 million streaming members" -- is being rightfully dissected for worrisome clues.

If you want to follow this saga, track the latest news by addingNetflixto My Watchlist.

At the time thisarticle was published Motley Fool newsletter services have recommended buying shares of Walt Disney, Amazon.com, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz has been a Netflix subscriber and shareholder since 2002. He does not own shares in any of the other stocks in this story, except for Disney. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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