Media

Netflix’s US subscriber growth slows, shares plunge

Shares down 27 per cent as $1 price hike discourage new customers

Netflix attracted about 980,000 new customers in the United States, its largest market, down from 1.29 million in the same period a year earlier
Netflix attracted about 980,000 new customers in the United States, its largest market, down from 1.29 million in the same period a year earlier
Thu Oct 16 2014 - 07:19

Netflix signed up fewer video streaming subscribers than forecast for the quarter that ended in September as its US growth slowed markedly, sending its shares plunging as much as 27 percent.

The company blamed a $1 price hike to $8.99 a month for discouraging new sign-ups. It lured 3.02 million new streaming customers globally, versus the 3.69 million it projected in July.

Netflix attracted about 980,000 new customers in the United States, its largest market, down from 1.29 million in the same period a year earlier.

The news came after Time Warner 's HBO said on Wednesday it will offer new competition next year with a streaming service that does not require a pay TV subscription.

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“Year-on-year net additions in the US were down,” Netflix said in a quarterly letter to shareholders. “As best we can tell, the primary cause is the slightly higher prices we now have compared to a year ago.”

Shares of Netflix fell 25 per cent to $333.53 in after-hours trading, from their $448.59 close on Nasdaq.

Netflix, waving off fears that a standalone HBO would draw users away, argued that many will subscribe to both services because they offer different shows.

“It is likely we both prosper as consumers move to Internet TV,” the company’s letter said.

Chief executive Reed Hastings said in an interview that he expected other premium channels such as Showtime and Starz to sell programming directly to consumers. CBS-owned Showtime said it was weighing such a move. Starz has announced plans to offer that type of service overseas.

Netflix has invested in original series such as House of Cards and Orange is the New Black to compete with HBO, Amazon. com and on-demand offerings from pay TV providers.

Netflix also is pushing into original movies, financing four Adam Sandler films and a sequel to martial-arts drama Crouching Tiger, Hidden Dragon.

The HBO news, overall stock market weakness, and the subscriber forecast miss likely sparked the share selloff, Hudson Square Research analyst Daniel Ernst. But he said Netflix has proven it can bounce back from disappointing quarters.

“They have got a good track record in growing past this turbulence,” said Mr Ernst, who rates Netflix a “buy.”

The company forecast it will add 4 million streaming subscribers in the fourth quarter.

Netflix expanded into six European countries in September. Its international subscribers grew 72 per cent to 15.84 million from a year earlier.

Net income rose to $59.3 million, or 96 cents per share, from $31.8 million, or 52 cents per share, in the year-ago period.

Revenue rose about 28 per cent to $1.41 billion.

Reuters