Netflix stock price tanks as customers quit over higher prices

Netflix released its earnings report for the second quarter today. The company was one of 2015's best performing stocks, but has seen its share price stumble in recent months on projections of slower growth. Today it reported $1.97 billion in revenue and net income of $41 million. Adding to worries about its growth, the company added just 1.54 million subscribers, well below its own projections of 2.5 million new customers. The stock is down around 14 percent in after-hours trading.

In its letter to investors, Netflix blamed the weak subscriber growth on churn, meaning older customers exiting. "Our global member forecast for Q2 was 2.5m and we came in at 1.7m. 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," Netflix wrote. "We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering."

The company stuck to its guns on the price hikes, writing that "while un­grandfathering and associated media coverage may moderate near­ term membership growth, we believe that un­grandfathering will provide us with more revenue to invest in our content to satisfy members, thus driving long­term growth."

Netflix needs to increase revenues, because in recent years it has invested heavily in expansion and original content. These improvements have enticed subscribers to join the service; Netflix gained 13 million new subscribers in 2014, and another 17 million in 2015. In both years, Netflix saw new subscriptions spike in the fourth quarter, with the second quarter yielding the lowest number of new subscribers.

Today's earnings report showed that the company may have seen the end of the explosive growth it generated in the run up to its expansion into 130 new countries. The company may soon have new upside in its domestic market, as it gains access to Comcast's X1 box, and perhaps hubs for other cable providers in the near future, but so far, it's not banking on these partnerships for new growth. In its investor letter, Netflix wrote it "does not include any boost in the US 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."

Comments

Unexpected churn? Hardly. Many customers would have cancelled their accounts after Netflix started enforcing their blocking of geo-unlocking services. Netflix is a lot less palatable when you live in an English speaking country (Trinidad and Tobago, Jamaica, Barbados and the rest of the English speaking Caribbean) but are grouped in with Latin America and have access to Spanish/Portuguese dialog and subtitles but not to English, and sometimes not even English audio tracks.

This. I almost cancelled my account after I couldn’t access US Netflix AND they increased the monthly price. Honestly don’t see the need for the higher price if they expanded into so many new countries and could get revenue from there

This. I was fine with their $1 increase. Once they started enforcing block of geo-unblocking services despite CEO denying that it’s happening – that was the turning point. Netflix Canada is pretty sad! Without access to US library – the subscription is not worth much regardless if it’s $7.99 or $8.99.

You just got The Force Awakens! Come on!

So blame the CRTC then. I’m sure Netflix would love to offer Canadians more content. I think their offerings are pretty good considering the dinosaur organization in Ottawa.

It’s not really the ctrcs fault though, different media companies negotiate the streaming rights to their programs.

This stupid proxy detection is even f****** with me in the us. AT&T has so many NAT levels in my building netflix believe I’m behind a proxy… Every other day I can’t play anything on Netflix at all. If this keeps happening, I’ll just cancel my membership…

And they wonder why people still torrent things!

Including me, and I have Netflix as well…

That wouldn’t account for Americans canceling their service though (although they may do that now if they can’t see Star Trek, damn their hides!)

Ironically, Netflix would never have been able to do the Star Trek deal with CBS if it weren’t blocking VPNs assiduously. CBS would not agree to let Netflix touch Star Trek if they thought that it would endanger their efforts to build a domestic subscriber base for CBS All Access. That one deal justifies Netflix VPN blocking because it’s going to be extremely valuable for them.

Seriously, Netflix is a great bargain. Stranger Things is an absolute blast of a series and Orange is the New Black just had a great season, maybe its best. Sure they have dogs (Marseille) but that comes with the territory.

I just finished Stranger Things and it’s one of the best series I watched in a while.

The price hike itself doesn’t seem substantial. I don’t think if you thought the service was worth it at $9/mo that you’re realistically going to cancel over another $0.03 a day. I think the trouble with Netflix is that their model is easily replicated and there’s nothing stopping a few major networks like USA and FX from coming together to compete with them in a big way once the idea of cable finally dies out. The biggest reason I would guess for most subscribers is their original series. And I don’t think a fragmented market where consumers pay for ~5 separate streaming services is realistic in the long term either.

It’s really not that easy to replicate because US and FX by themselves don’t have enough content to base a service on (even if FX is better than HBO when it comes to current content) and joint ventures mean lots of competing interests (see: Hulu).

Right now, CBS All Access is trying this stand-alone/mimic Netflix strategy by announcing that Americans can only see the new Star Trek series via their service, resulting in much foot-stomping and declarations of intent to pirate Star Trek rather than give six bucks to those bastards at CBS. Doesn’t look easy to me at all. If Star Trek won’t get folks to whip out the old credit card, what will?

I think a lot of people have been on the fence with Netflix for a long time. Personally, I might use the streaming service once a month, and often that involves browsing the list of stuff for an hour and then shutting it off. (The Onion even did a joke story about Netflix introducing an "Endless Browsing mode", so I know it’s not just me.) I just don’t care about their original stuff, which has universally bored me to death (I’ve tried all the shows other people say are great), and increasingly if you don’t like their original stuff, there’s nothing there to hold your interest.

I doubt I’ll cancel because I still have their DVD/BD service, which I use a lot more often (it gets all the new releases) and it’s just easier to have them both. And for me, $10 a month still isn’t much.

But not everybody has money to basically throw away every month. If someone was thinking about canceling anyway – and I think Netflix has a lot more users like that than they’d like to admit – they now have a pretty good excuse to finally do it.

The reliability, interface and ubiquity are really great and still better than Amazon’s, however frustrating it can be at times as they move stuff around constantly for A/B testing.

It basically comes down to how much you like old stuff, right? Their own new stuff is hit or miss, but there’s more and more of it, too. And they’re getting bunch of Disney movies. But that stuff comes and goes, right?

I personally watch a few movies on there and a bunch of old tv that I never got around to watching before. What’s on cable TV, after all? Typically a lot of empty reality tv or old TV shows just like that. At one time Netflix brought us Top Gear and Doctor Who when it wasn’t on cable, and now BBC built their own network. But there’s still a lot on there for certain people like me.

I use it all the time and it’s still unbeatable for kids, however, Amazon is getter better. I think Hulu gets killed by individual network apps, it has in my house. I think Slingtv has it’s own appeal because of sports. And Youtube is probably in trouble with it’s aimless strategy.

There’s always going to be stuff coming and going but that’s why their originals are so important and while I’m not a huge fan of any specific series, the originals they have chosen have been very smart.

This article actually reminded me I can now cancel my Netflix membership for a few months. I was grandfathered into a $2 savings each month. At that point I didn’t want to cancel because I know I would want to join again when X new season came out. So canceling for 2 months would have saved me $16 which after 8 months would end up costing me more.

Now that I will pay the same price as a new customer I am more likely to cancel/resubscribe from time to time.

People leaving Netflix over $1 a month lol? – Hard to believe

Get over yourselves Un-grandfathered people! You don’t get to watch Stranger Things without Netflix! Which is easily worth a subscription on its own!

$2/month if you’ve been around long enough. Netflix is going from $7.99 to $9.99 for me. Still an incredibly low price given how much use I get out of it and that I don’t have cable.

Someone failed at basic math

And who might that be?

Yep. You.

Damn…..and this is here forever.

Wait… I know I’m late but who failed at math?

Definitely not me. I still pay $7.99 and everyone is getting kicked up to $9.99. That’s $2.

Yeah, I’m with you on this. $10/month is still a great price. When I think about how much Netflix charges for their service, I’m amazed that music streaming services charge exactly the same.

I honestly wouldn’t give a shit of Netflix doubled its subscription price if that meant more high quality programming. I think most anyone is wiling to cancel cable so long as the programming they’re getting is the same quality or better.

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