Netflix Shares Fall due to Weak US Subscribers
Netflix Inc., the video streaming service provider reported that the additions to its US subscriber base in the third quarter were way below forecasts. The service blamed the miss on the transition to chip-based cards. Netflix is known for some very unique and original shows such as ‘Orange is the new Black’ and ‘House of Cards’ and the company’s shares took a dive about 15% after the numbers were disclosed. However, they clawed back up and closed down at about 2.4%. The credit and debit card companies in the US have been making the transition to chip-enabled cards in the country before the October 1st deadline that mandated the move.
The switch didn’t work out in favor of Netflix because it meant that a number of the old cards that were on its file were no longer working as new cards had been given out by companies to their customers. According to Reed Hastings, the chief executive officer at Netflix, the switch led to an ‘involuntary churn’ as he put it in a letter to the shareholders. Analysts were not satisfied by his response as some claimed it to be dumb. Others said that it was rather confusing because chip-based cards weren’t exactly a new concept and had been around for some time now.
On Wednesday, Netflix had made the announcement that it had increased its US subscribers about 0.88 million in the third quarter that drew to a close on September 30th. The forecast for the increase in subscribers had been about 1.15 million. Experts said that the slow growth of subscribers in the US had come as a huge disappointment because Netflix had just increased its rates in the previous week so the market was investing strong growth in subscribers. Earlier this month, the subscription rate for new members had been increased by Netflix by $1 per month.
This meant that the subscription rate would now be $9.99 in Latin America, Canada and the United States. As far as global increase of subscribers is concerned, Netflix was able to do even better than expectations. The forecast had predicted growth in subscribers to be about 2.40 million, but the video streaming service saw a rise in subscribers by 2.74 million. The company is facing increased competition from other streaming services such as Hulu and Prime Video service of Amazon.com. Therefore, the company has been taking on aggressive measures for developing its presence in the overseas market.
The company said that its entry in the Chinese market was still new and there was a learning curve. In July, the service had said that its plans of entering China in 2016 could be subjected to a delay. As far as the news side was concerned, the firm’s stance was rather adventurous, but it said that it wasn’t focusing on offering live sports any time soon. In the current quarter, the forecast of US subscriber growth is about 1.65 million. Internationally, Netflix is expected to add about 3.5 million subscribers to its existing base.