Netflix said the increases were one reason why the company will add just 300,000 United States subscribers in the three months to September – far fewer than the 880,000 added in the same period past year. As Netflix establishes itself in new markets, some might be faster to adopt the service than others, the executives said.
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Investors greeted the after-hours news with sheer panic – shares fell like a house of cards, to $85.32, a decline of 13.7 percent.
Analysts estimate that about 20 million subscribers may be forced to pay between $1 and $2 more a month by the end of this year.
Venturebeat recalls that the company expected 2 million new subscribers internationally and 500,000 in the United States for a total of 84 million subscribers.
But some analysts are growing exhausted of excuses, and expressed concerns Tuesday about a more fundamental decline in popularity of the on-demand giant’s programming.
“Similarly, we don’t believe market saturation is a key factor in the USA given that we experienced similar performance over the same period in multiple countries with differing levels of Netflix market penetration”, said Hastings.
Netflix is now forecasting 2 million net additions in Q3.
Netflix said growth was hurt, especially in the U.S., after it raised rates on many long-time subscribers who had been “grandfathered” when it hiked most prices.
Netflix CEO Reed Hastings included this Google Trends graph in the company’s earning report to show an uptick in the search term “netflix price increase” earlier this year.
Analysts on average expect the company to add 774,000 subscribers in the United States and 2.85 million in the worldwide markets in the third quarter, according to research firm FactSet StreetAccount.
Only one brokerage, UBS, lowered its recommendation on Netflix’s shares, to “neutral” from “buy”. According to Netflix, when the media reminded people that the grandfathered rate was about to expire, customers who weren’t in line for the price hike got confused and in some cases canceled their subscriptions. The company reported only 1.7 million new subscribers, falling significantly short of its 2.5 million new customer target. Netflix expects to conclude the un-grandfathering over the second half of this year.
Netflix experienced a global slowdown in growth in the second quarter, securing only two-thirds of the new streaming subscribers it had previously forecast. Netflix’s revenue for the quarter was up 19.5% on a year-over-year basis.
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Investment firm Canaccord Genuity weighed on Netflix in an updated research note sent out to clients and investors in view of the company’s earnings results.
