Netflix Subscriber Growth Stalls In Second Quarter

Subscriber growth for the Netflix (NASDAQ:NFLX) streaming video service slowed significantly during the second quarter, disappointing Wall Street. Netflix added 1.7 million new streaming members in the three months that ended June 30. In the same period the previous year, there were nearly twice as many net additions. The reported number was well below the company’s forecast of 2.5 million new members in the quarter.

Netflix added just 160,000 new streaming members in the United States during the quarter. Netflix now has 46 million subscribers in the United States, with a goal of reaching 60 million to 90 million subscribers. The additions in the United States was the lowest quarterly total since Netflix began reporting those figures in 2012.

Outside the United States, Netflix added 1.5 million new subscribers. The company now has about 33.4 million subscribers outside the United States. That was the smallest international growth since the second quarter of 2014. In a letter to shareholders, Reed Hastings, chief of Netflix, acknowledged that Netflix was not growing “as fast as we like or have been.”

Netflix shares fell as much as 16 percent in after-hours trading after the announcement. This was the second earnings report in a row that has sparked a double-digit plunge in the company’s stock price. So far this year, Netflix’s share price has declined about 14 percent. Mr. Hastings has apologized to shareholders for the volatility in the company’s stock. Netflix stock surged 135 percent in 2015 and was the top performer on the Standard & Poor’s 500-stock index.

The company blamed news media coverage of its plans for price increases for the lackluster subscriber growth in the quarter. Netflix used a Google Trends chart to demonstrate the increased media coverage of its subscription hike. The number of searches for the specific term “Netflix price increases” spiked in interest after Netflix announced the price increase.

In its mid-April earnings call, Netflix said that price increases of $2 a month would begin rolling out in May. In the United States, three different tiers now cost $8, $10 and $12.Netflix had previously disclosed the planned increases and been charging new customers the increased amount, but had “grandfathered” in existing subscribers at their previous rates. Customers who learned that their price was about to increase had begun canceling their subscriptions.



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