Netflix cancellations hit share price | Business| Economy and finance news from a German perspective | DW | 19.07.2016
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Business

Netflix cancellations hit share price

Shares in the wildly popular video streaming service Netflix tanked after the company said it had added far fewer new subscribers than expected. The stock has already shed 13 percent of its value and could drop further.

For years, the United States' most popular Internet video streaming service logged rampant growth. But now, after a phased-in price increase, Netflix is growing at a much slower clip.

In after-hours trading on Monday, shares in the company lost $13.16 (11.90 euros), or almost 15 percent, in value. If those losses continue into Tuesday, the stock could be on course to lose a quarter of the value it has accumulated since the beginning of the year.

The problem is that while Netflix recorded six-figure growth in the United States, the 160,000 new subscribers it added to its video streaming service from April to June this year was a far cry from the half a million that analysts had expected.

Cancellations

The company blamed a hike in rates for long-time subscribers who had for years been grandfathered, but now were seeing their monthly fees increased by as much as $2 per month. That followed the expiration of a two-year rate freeze.

"People don't like price increases, we know that," Netflix CEO Reed Hastings said. "It is a necessary phase we must get through."

Netflix is available in over 190 markets around the world, and the company counted 1.5 new subscribers outside the US in the second quarter. In the first three months of the year, it added 6.74 million new users after adding 130 countries to its portfolio.

Netflix expects to add 300,000 users in the US in the third quarter, plus an additional 2 million around the world.

Net profit from April to June was $41 million, up from $26 million a year earlier, according to AFP. Revenue rose to $2.1 billion from $1.6 billion. Netflix faces increasingly stiff competition from other streaming services as well.

cjc/kd (AP, AFP)

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