NEWS
NEWS
NEWS
Netflix shares tank after disappointing Q2 results
Stagnant subscriber growth and disappointing earnings have led to a sharp 15 percent drop in the value of Netflix’s shares in after hours trading. According to the company’s recent Q2 earnings report, its subscriber base increased by only 1.7 million users, far lower than its own forecast of 2.5 million users and nearly half the number of users it added during the same period last year, which was 3.3 million. Meanwhile, Netflix’s net income was only $41 million compared to the industry forecast of $47 million.
During Netflix’s recent Q2 earnings call, company co-founder and CEO Reed Hastings attributed the low subscriber figures to price increases for the service, and he believes that this is not a long term trend for the company.
“People don’t like price increases,” Reed Hastings said during the earnings call. “We know that. It’s a necessary phase for us to get through, and then with the increased revenue, we’re continuing to invest in better and better content. That’s what makes us feel very strong and positive about the long term, and that this is a short term phenomenon.”
Netflix CFO David Wells added that the impact of increased pricing on subscriber numbers could continue into Q3 and even into Q4, but Hastings noted that the price increase has little effect on the acquisition of entirely new subscribers.
“With new members, we haven’t seen any effect,” Hastings said. “We changed prices to our $8, $10 and $12 last October, and we’ve had a couple of quarters of great growth on the gross add side. I think this is really around change resistance. Whatever the price is for something, people don’t like it to go up, but in terms of new members, which is most of what drives growth, the new pricing is working great.”
Despite its lackluster Q2 performance, Netflix remains one of the most popular subscription streaming services on the market, and at the end of last year, the company claimed that it had over 75 million users.
You can watch Netflix’s full Q2 earnings call below:
Screenshot via Netflix Investor Relations | YouTube
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