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Netflix facing tougher times as subscriber growth slows

Netflix had a huge miss in United States subscriber growth for the second quarter, and chalked up the poor results to a misunderstanding over a recent price hike.

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Netflix added 1.7 million subscribers worldwide, well below the 2.5 million subscribers the company predicted it would add in the three-month period ending June 30. The company ultimately netted 160,000 new customers in the US and 1.52 million overseas, landing under 1.7 million total in the quarter.

In a letter to shareholders on Monday (local time), Mr Hastings revealed the company’s subscriber base grew by only 1.7 million members this quarter, below its projected figure of 2.5 million. “The big picture is very much intact, we’re very excited about it, so we’re continuing to execute on growing the business”.

The letter further reads that “Gross additions were on target, but churn ticked up slightly and unexpectedly, coincident with the press coverage in early April of our plan to ungrandfather longer tenured members and remained elevated through the quarter”. That’s a substantial increase from the $1.64 billion that the company amassed during the same period past year, but the lack of growth in the company shows that investors are anxious Netflix may have hit its peak.

Netflix shares dropped to $84.40 in after-hours trading from a close of $98.81.

Netflix share plummeted more than 14 percent today following the news. It added 1.5 million worldwide subscribers, against a 2 million forecast, bringing its overall subscriber total to 83 million. In net terms, the video streaming service added around 160,000 million users in the USA, but it was predicting a gain of 500,000 million users. “It is a necessary phase we must get through”.

Q2 Revenue: $2.1 billion, up 31% year-over-year, and in line with Wall Street forecasts of $2.11 billion.

Its head start in internet video meant Netflix was able to license previously released TV series and films at relatively affordable rates, in part because studios hadn’t yet realized how valuable streaming rights would become. “Whatever the price is for something, people don’t like it to go up, but in terms of new members, which is most of what drives growth, the new pricing is working great”.

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The internet video service Netflix reported subscriber numbers late Monday that missed the company’s own guidance by a wide margin. The company has almost doubled the amount of original shows it offers to streaming users – from just 16 shows in 2015 to 31 shows this year. However, the company itself forecasted these numbers at 300,000 United States subscribers and two million global subscribers. “We continue to explore options and, in the meantime, have plenty of work to do in our newly opened markets”.

Netflix Falls 15%: Q2 Mixed, Subscribers, Q3 Forecast Miss