Netflix blames weak US subscriber adds on new chip-based cards

  • TECH
  • Thursday, 15 Oct 2015

Obfuscating: Analysts find the vague excuse Netflix gave for not hitting its forecast subscriber numbers is ridiculous.

Video-streaming service provider Netflix Inc reported third-quarter US subscriber additions below its own forecast, blaming a transition to chip-based cards for the miss. 

Shares of Netflix, known for its original shows such as House of Cards and Orange is the New Black, plunged about 15% after the bell, before clawing back to trade down 2.4%. 

US credit and debit card companies have been shifting to chip-enabled cards ahead of the Oct 1 deadline mandated for the switch. 

For Netflix, the switch meant that many of the older cards on its file no longer worked as the companies gave new cards to their customers, leading to "involuntary churn," as chief executive Reed Hastings put it in a letter to shareholders. 

"It's just the dumbest thing I've heard," Wedbush Securities analyst Michael Pachter said. 

FBR Capital Markets analyst Barton Crockett said the issue around the chip cards is particularly confusing, given that these cards have been around for a bit. 

"It begs a million questions," he said. 

Netflix said it added 0.88 million US subscribers in the third quarter ended Sept 30, compared with its forecast of 1.15 million. 

"The slowdown in US subscriber growth was particularly disappointing because one would expect that since Netflix just raised rates last week, this number would have been strong," said Crockett. 

Netflix increased the subscription rate for some new members earlier this month by US$1 (RM4) a month to US$9.99 (RM41) in the United States, Canada and Latin America. 

Internationally, Netflix added 2.74 million subscribers, compared with its projection of 2.40 million. 

Netflix, which is also battling competition from streaming services such as Inc's Prime Video service and Hulu, has been aggressively building its overseas presence. 

The company said it was in the "early stages" of its China entry and said it was "still learning a lot". 

Netflix said in July its plans to enter China in 2016 could be delayed. 

Netflix is being "more adventurous" on the news side, company executives said on a post-earnings conference call. 

The company added it was not looking at live sports as an offering currently. 

"There's a lot of irrational bidders for sports, we're not anxious to become another one," Netflix's head of content Ted Sarandos said. "Sports on demand is not as exciting as sports live." 

Netflix forecast adding about 1.65 million customers in the United States in the current quarter. It also said it expected to add about 3.50 million subscribers worldwide. — Reuters 

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Next In Tech News

Group backed by Uber, Lyft pushes Massachusetts gig worker ballot measure
LinkedIn must face narrowed U.S. lawsuit claiming it overcharged advertisers
Russia plans to subsidise electric cars to spur demand
Robinhood shares surge more than 80% as retail investors dive in
Brazil retailers hunt for M&A deals to compete for e-commerce dominance
No, the Covid vaccine doesn’t have a microchip. How US doctors are fighting misinformation
Kuaishou ends US push by shutting down TikTok clone
Amazon launches free one-day delivery in Brazil amid fierce competition
Iranians fear new bill will restrict Internet even further
Chinese state media soften tone as criticism of gaming continues

Stories You'll Enjoy