Netflix slips, and disappoints investors

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Netflix’s Q2 numbers disappointed Wall Street having suffered a drop-off in subscriber growth.

Globally, Netflix added 2.7 million subs in the April-June period, well down on consensus expectations of 5 million. However, plenty of overnight comments have pointed out that the streaming company managed almost 10 million subscribers in Q1, a 12-year record.

There were further anxieties as Netflix’s 13-18 per cent price hike is also now kicking in. The UK saw price rises on July 17th applied. US subscribers are now paying $13 per month for its most popular plan. Churn in the US saw 120,000 subscribers quit Netflix, but still leaving almost 60 million paying for the service.

After-hours trading saw Netflix’s stock price plummet 12 per cent. If this fall is endorsed in today’s active trading it would mean an $18 billion wipe out in the company’s valuation.

Overall, Netflix ended the June quarter with 151.6 million subscribers, and the company is forecasting adding 7 million to that number during Q3.

“I think our position is excellent,” Netflix CEO Reed Hastings said during a Wednesday webcast. “We’re building amazing capacity for content. Our product has never been in better shape.”

Hastings stressed there was no plan to start taking advertising, and Netflix would remain free of commercials.

Commenting on the loss of some very popular shows, such as The Office and Friends, Hastings told analysts that not having to pay for these programmes would free up considerable cash to help fund new programming.  During the earnings interview, Ted Sarandos, chief content officer said “content comes and goes,” and Netflix will focus instead on convincing users that “we’re going to create their next favorite show”.


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