A confluence of negative factors slammed Netflix in the past quarter, resulting in subscriber numbers and other metrics exposing Netflix’s vulnerabilities – and leaving the streaming giant’s stock plunging in after-hours trading.
While earnings-per-share came in at $0.60, four cents above expectations, and revenue was only $10 million short of expectations at $4.92 billion, the subscriber numbers were of grave concern.
Domestic paid subscribers actually fell by 126,000, while the expectation was for an increase of 352,000. That’s a miss by almost half a million subscribers.
Yet Netflix management doesn’t really have a good excuse for this decline, and is using some smoke and mirrors to downplay it.
On the one hand, management said there wasn’t any material change to the competitive landscape. On the other, Netflix claims the number of subscribers added in the first quarter was so large that there may have been “more pull-forward effect” than it realized.
That may explain why there weren’t any subscriber additions, but it doesn’t explain the 126,000 subscribers that canceled the service. It’s the first quarter-to-quarter decline in years.
And yet, management claimed that domestic subscriptions were “essentially flat.” That’s the smoke and mirrors.
Why Cancel Netflix? Try Price Hikes and Lousy Content
After so many quarters and years of subscriber addition, why would Netflix subscriber suddenly decline?
The first obvious reason is that Netflix instituted a price hike over the past quarter. It seems possible that, given this price hike came so rapidly after the last one, that Netflix subscribers see the writing on the wall.
It suggests that Netflix will need to continue raising prices,