Netflix’s stock tumbled Thursday after the company reported it lost U.S. subscribers for the first time in eight years.
Q1 Earnings Report Summary
The company lost 130,000 subscribers in the U.S. in the first quarter, well below the forecast of 5 million subscriber additions that Wall Street analysts had expected. It was the first time Netflix had lost domestic subscribers since 2011.
Why?
Netflix blamed the subscriber losses on its decision to raise prices for U.S. customers by $1 a month earlier this year. The price hike caused “some” subscribers to cancel their service, the company said.
More About Prices
The price increase, which took effect in May, caused Netflix’s monthly subscription price to increase to $13 from $12 for new customers. The price hike didn’t affect existing customers until this month.
Netflix also said it is facing more competition from other streaming services, such as Amazon Prime Video and Hulu. The subscriber losses come as a surprise because Netflix had added a record 6.8 million subscribers in the first quarter, which included the company’s biggest ever price increase.
Stock Numbers
Netflix’s stock was down more than 10 percent in after-hours trading Thursday. The company’s stock had been on a tear this year, more than doubling in value as investors bet on the company’s continued growth.
But Thursday’s report cast doubt on whether Netflix can keep up its torrid pace. The company said it expects to add 7 million subscribers in the third quarter, which would be a slowdown from the 10 million it added in the same period last year.
Netflix said it expects its operating income to be “negatively impacted” in the second half of the year because of the cost of its new content. The company is spending billions of dollars on original programming, such as the upcoming “The Crown” and “Stranger Things.”
Despite the subscriber losses, Netflix reported strong growth in revenue and profit in the second quarter. Revenue increased by 32% to $3.91 billion, with profit nearly tripling to $384 million.
