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January 5, 2012 by · Leave a Comment 

People are watching a lot more movies and TV shows on Netflix’s streaming service than most analysts had suspected. The online movie-rental service, which has not figured in many positive stories of late, said Wednesday that its streaming-service subscribers watched more than 2 billion hours of content in the last quarter of 2011. BTIG Research analyst Richard Greenfield, a frequent critic of Netflix chief Reed Hastings, had forecast that the company would report about 1.2 billion viewer hours during the quarter. He told the Los Angeles Times on Wednesday that if Netflix were a cable network, it would be the 15th most-watched. (Rival HBO announced today that it will no longer sell DVDs of its show to Netflix at wholesale prices.) Investors, who had fled the company after a series of admitted missteps by Hastings, began returning on Wednesday, sending Netflix shares soaring 11 percent on the Nasdaq exchange. It promptly dropped 3.35 percent today (Thursday) and was trading at $77.76 after Needham & Co.’s Charlie Wolf reiterated his Underperform rating on the stock. “Netflix’s streaming content costs have been increasing far faster than its installed base of streaming subscribers,” Wolf said. “Netflix’s content costs are rising at an unsustainable rate [as] …. profitability of its streaming subscribers is falling.”