Netflix shares plunge as subscribers switch off

Shares in Netflix fell by 15 per cent on Tuesday after the video streaming service announced a growth of 1.7 million new subscribers in the second quarter, well below its 2.5 million forecast.

Its failure to reach growth targets is partly due to subscriber cancellations after higher charges caused upset among its earlier users, Bloomberg reports.

The streaming site, which has 83 million members, said the market "can be bumpy", adding: "We are growing, but not as fast as we would like or have been."

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Netflix reported a net income of $41m (£31m) against a forecast of $47m (£37m), which it says is largely due to "lower than expected content and other costs".

It downplayed the rise of rival streaming services such as Amazon Prime Video and YouTube Red, saying this had not contributed to the disappointing figures.

Netflix says it does not believe market saturation is a key factor in the US "given that we experienced similar performance over the same period in multiple countries with differing levels of Netflix market penetration".

However, says Quartz reporter Adam Epstein, this is Netflix's fourth consecutive miss on US subscriber estimates and despite its claim that the market is not saturated, "the onus is now on the company to prove it".

Netflix shares drop over fears for subscriber numbers

19 April

Movie and TV streaming site Netflix's stock dropped dramatically yesterday after it forecasted weaker-than-expected subscriber growth.

Shares fell about 2.8 per cent during the trading day and another nine per cent in after-hours trading, according to the BBC.

The downturn came after Netflix said it expects to add only another 500,000 customers in the US during the current quarter, rather than the 586,000 it had hoped. Internationally, it forecasts an increase of just two million subscribers in place of the anticipated 3.5 million.

That global figure compares unfavourably with the 2.37 million who signed up during the same period in 2015, observes the Wall Street Journal.

Investors lost confidence despite a promising start to the year: in the first quarter, Netflix added 6.74 million subscribers at home and abroad, ahead of its estimated 6.1 million, as it launched its service in 130 new markets.

The latest forecast is "below street estimates and reflects an unexpected slowdown despite the fact they just went global", Tony Wible, of Drexel Hamilton, told the WSJ. "Investors will want to dig into that more."

According to the Motley Fool, another factor worrying investors was online retailer Amazon's announcement that it is launching a standalone video streaming service.

Currently, the internet giant offers streamed movies and TV shows to subscribers to its Amazon Prime premium delivery service. Last weekend, it began offering a Prime Video-only service at $8.99 a month, or £5.99 in the UK.

"For now, Amazon's Prime Video is still too small to impact Netflix in any meaningful way," says the Motley Fool. "But as Amazon spends more money on streaming video, it's possible that the e-commerce giant's invigorated efforts could pressure Netflix over the long haul."