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Netflix Inc. shares plunged more than 10% in the extended session Wednesday after the video-streaming giant badly missed projections for new paid subscriptions.
Netflix NFLX, -0.97% reported the addition of just 2.7 million paid subscribers globally in the second quarter, far short of what Wall Street and the company expected. Analysts were looking for global paid streaming subscriber additions of 5.3 million, according to FactSet, on domestic additions of 350,000 and 4.8 million internationally. Netflix had projected 5 million new customers.
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In a letter to shareholders, Netflix executives noted that price increases began rolling out earlier this year, and disappointing subscriber additions were more targeted in regions that were experiencing the larger bills. They pointed more at a lack of fresh content in the quarter, though.
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“We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions (while our over-forecast was in every region),” they wrote. “Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated.”
During an earnings video-conference call late Wednesday, Netflix CEO Reed Hastings said no single factor led to the subscription shortfall. A pricing increase, the quarterly content slate and seasonality were all factors, he and Chief Financial Officer Spencer Neumann acknowledged.
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The subscription miss was Netflix’s largest since the second quarter of 2016. It lost 126,000 domestic paid subscribers vs. an expected gain of about 310,000.
Netflix was hurt by the defection of lower-priced subscribers who may be looking to jump to a wave of competing services over the next six to 18 months, eMarketer forecasting analyst Eric Haggstrom told MarketWatch in a phone interview. “Higher prices and more content choices could prove to be a difficult road, undercutting Netflix’s pricing power,” he said. “But a...
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