Netflix reported earnings after the bell on Monday, seeing its shares quickly tumble 15% in after-hours trading after missing the mark on subscriber growth. Netflix only added 160,000 thousand new subscribers in its second quarter, coming in far under the 900,000 subscribers that the company saw during its second quarter previous year.
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“The big picture is very much intact, and we’re very excited about it, and so we’re continuing to execute on growing the business”.
Netflix, which has been phasing in price rises for existing customers by $1.00 or $2.00 per month, said on Monday that cancellations “ticked up slightly and unexpectedly” in early April as it rolled out a so-called “un-grandfathering” strategy.
“We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering”, Hastings said. Analysts had expected $0.03 earnings per share, as well as revenue of $2.11 billion. Despite Netflix’s increase in programming, “Whatever the price is for something, people don’t like for it to go up”, Hastings admitted, while still claiming that the new price tiers are “working great” for new members.
In adding 160,000 new U.S. users, Netflix fell well short of the growth achieved in previous quarters.
The company, started in 1997 as a DVD-by-rental firm, is also increasing its spending on movie and TV content and is signing up more streaming deals. This slower-than expected growth’s cause?
Analysts estimate that more than 20 million subscribers may be hit with a price increase between June and the end of this year.
The online streaming corporation ended the second quarter with 83.18 million subscribers all over the world, including 36.05 million in global markets and 47.13 million in the United States.
According to Netflix, the number of users who were “un-grandfathered” from their plans is “modest” and meets their expectations.
Netflix fared better outside the USA, but its second-quarter gain of 1.5 million worldwide subscribers still missed management’s projections.
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Netflix, however, said it “does not include any boost in the USA from the Comcast X1 launch due to uncertainty on timing as we and Comcast will only release Netflix on the X1 when the viewer experience is great”.
