Video streaming company Netflix has grown its subscriber base by 1.68 million users in the first quarter, even though the forecast was 2.5 million users.
Netflix Subscriber Cancellations Rise along Price Increases
The company has announced that it would increase charges for existing users, a move that has seen a sudden but slight rise in subscriber cancellation.
This saw a sharp fall in Netflix shares down to 85.90, a 13% decline in after-trade hours in New York.
Netflix shares regularly experience large movements on the markets as investors speculate on its ability to influence TV viewing habits globally.
According to Michael Pachter, a Wedbush Securities analyst, Netflix shares are currently down as a result of the slowdown in domestic subscriber growth. Domestic profits compensate for the losses the company may incur in international markets.
Netflix acknowledges that growth in the US has slowed down and the same trend is evident in international markets.
In a statement, the video streaming firm admitted, “We are growing but not as fast as we would like to or have been.”
Analysts estimate that up to 20 million Netflix subscribers may have to increase their monthly fees by about $1 or $2 by the end of this year.
Netflix indicated that the price increases will have implications for subscriber growth and will see just 300,000 new subscribers in the US in the three months to September. This figure will be far fewer than the 880,000 subscribers who signed up last year.
Netflix’s premium prices have contributed to the company’s rise in revenue by 28% up to $2.2bn.
The video streaming service has gained popularity for shows such as Unbreakable Kimmy Schmidt, House of Cards and Orange is the New Black and has attained almost universal penetration. Even then, the service continues to face stiff competition from rivals such as Hulu and Amazon Prime.
The firm also faced additional challenges such as content localization to appeal to the unique audience in each country where its services are available.
Netflix is still unavailable in China as a result of what it terms as a strict regulatory environment. China does not allow Apple or Disney streaming services as well.