Netflix facing tougher times as subscriber growth slows

Netflix facing tougher times as subscriber growth slows

Netflix facing tougher times as subscriber growth slows

Netflix saw net additions of 1.52 million internationally, below the 2 million guidance, and it expects to add 2 million subscribers next quarter, compared to expectations of 2.7 million to 2.85 million.

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.

Q2 global subscriber growth (net additions): 1.52 million versus Wall Street forecasts of 2.15 million, and Netflix guidance 2.0 million.

"Well the obvious explanations other than this are competition, which we're pretty confident that it is not a factor because we got this slight uptick in churn in multiple countries the same week and-of course that's not a competitive signature-including Canada, where numerous other SVOD services don't operate", he said in a conference call with investors on Monday.

Netflix blamed a rough second quarter earnings report on churn - or member cancellations related to previously-announced price increases - that could persist over the next few quarters but shouldn't be a long-term issue, according to the company.

In Asia, Netflix competes with rivals that offer more Asian content, including Iflix and Viu, which position themselves as more competitively priced local challenger brands.

In after-hours trading, Netflix shares plunged more than 16 per cent to $82.59 U.S. by 4:30 p.m. ET.

Netflix said it "slightly under-forecast the quarter" as it ended Q2 with operating income of $70 million and net income of $41 million, versus a forecast of $47 million and $9 million, respectively, citing lower-than-expected content and other costs.

Netflix shares were down 13.5 percent at US$85.48 before the opening bell on Tuesday.

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. In all, the company added only 1.7 million subscribers, coming up far short of even its own projection of 2.5 million.

Netflix expects to complete its un-grandfathering process in the second half of 2016.

"The big picture is very much intact, and we're very excited about it, and so we're continuing to execute on growing the business". Meanwhile, the company has had slowing USA subscriber growth in every one of the last four quarters compared to the previous year.

Nor does it seem that the bad news was the result of market saturation. Haverty also said that Netflix has more challenges ahead as the competition gets tougher.

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