Online DVD rental company Netflix Inc. (NFLX) Wednesday said quarterly earnings fell due to marketing costs from its war with rival Blockbuster Inc (BBI) and other charges, but subscriptions rose faster than forecast, and results topped Wall Street expectations.

The company said net income fell to $6.9 million, or 11 cents per share, from $18.9 million, or 29 cents per share in the year-earlier quarter.

The company posted revenue of $174.3 million compared with $141.6 million for the year-earlier quarter.

Netflix said churn, or subscriber cancellations (search), declined to a record low of 4.3 percent compared Netflix's subscriber base grew by 61 percent, year over year, to 3.592 million in the third quarter.

It had previously expected to end the third quarter with 3.35 million to 3.50 million subscribers.

The company said on Wednesday it expected to reach or exceed its previously stated goal of 4 million subscribers by year's end, forecasting an ending subscriber base in 2005 of 4 million to 4.2 million.

Los Gatos, Calif.-based Netflix also sweetened its financial outlook, raising its fourth-quarter net income estimate to between $4 million and $7.5 million from $1 million to 6 million, and its revenue estimates to between $191 million and $196 million from $187 million to $193 million.

For fiscal 2006, Netflix forecast pretax net income of $50 million to $60 million, revenue of at least $940 million and ending subscribers of at least 5.65 million.

At an analysts' conference in September, the company said it expected pretax net income to rise to $50 million in 2006.

Netflix shares were down 4.4 percent at $27.10 in after-hours trade on Inet after closing at $28.35 on Wednesday on Nasdaq.