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Netflix Stock Tumbles as Subscriber Growth Falls Far Below Expectations Netflix Stock Tumbles as Subscriber Growth Falls Far Below Expectations
(30 minutes later)
Netflix, the streaming juggernaut that has upended the entertainment industry, showed signs of vulnerability Wednesday when it significantly undershot the number of customers it had expected to sign up for the second quarter.Netflix, the streaming juggernaut that has upended the entertainment industry, showed signs of vulnerability Wednesday when it significantly undershot the number of customers it had expected to sign up for the second quarter.
The company said it had added 2.7 million subscribers for the three months ending in June, well short of the five million Wall Street investors were expecting. The company also lost 130,000 domestic customers during the period, meaning all of its growth came from overseas. The company said it had added 2.7 million subscribers worldwide for the three months ending in June, well short of the five million that investors were expecting.
It also said it had lost 126,000 paid subscribers in the United States during the period, the first time it has shed domestic customers since it started putting out original programming seven years ago.
Netflix’s stock fell more than 10 percent after the market closed, a drop of more than $17 billion in market value.Netflix’s stock fell more than 10 percent after the market closed, a drop of more than $17 billion in market value.
The second quarter is typically the company’s weakest period, but Netflix performed worse this time around. The second quarter is typically the company’s weakest period, but its performance this time was unusually poor. At the start of the quarter, Netflix announced that it was raising prices by anywhere from 13 to 18 percent, depending on the subscription plan. In its statement on its second-quarter earnings, the company acknowledged that the higher rates had something to do with its failure to meet expectations.
The upside is that the company revised its forecast for the current quarter — when the new season of one of its biggest hits, “Stranger Things,” has been made available — and now expects to add more than seven million customers for the summer period, slightly up from its previous estimate. Netflix decided to charge more at least partly because it burns a lot of cash, much of it borrowed, and spends wildly on Hollywood talent. Last year, the company signed Ryan Murphy, the prolific producer behind “Glee” and the anthology series “American Crime Story” and “American Horror Story,” to a five-year deal said to be worth nearly $300 million.
This story will be updated. After wooing him away from 21st Century Fox, Netflix signed another name producer, Shonda Rhimes, the creator of ABC’s “Grey’s Anatomy,” away from the Walt Disney Company, giving her a nine-figure deal.
In its report on Wednesday, Netflix revised its forecast for the current quarter, when the new season of one of its biggest hits, “Stranger Things,” has been made available. It said it now expected to add more than seven million customers during the summer months, slightly up from its previous estimate.