Netflix’s latest bout of bad news sends stock plummeting — again

By Stephanie Topacio Long July 18, 2016

Netflix Announcement — Netflix

It’s been a rough few months for Netflix shareholders, and today’s quarterly earnings report didn’t help. The company had to share bad news with its good news when it released its Q2 financials on Monday, as subscriber growth and revenue both fell below analyst expectations, reports Forbes. As a result, the company’s stock dipped by as much as 15 percent in after hours trading.

Netflix had hoped to add 2.5 million new subscribers during Q2, but the final tally this year came in at just 1.7 million. The number fell well short of the 3.3 million subs the streamer snagged during the same period in 2015. On top of that, Netflix’s net income was $41 million instead of the $47 million that had been forecast.

The company indicated that its prices increases have played a role in its less-than-stellar numbers. Members who were grandfathered in at lower rates are due to see new prices take effect, and that has negatively impacted retention. Nonetheless, Netflix remains committed to the price hike for the sake of being able to investing in content.

“While un-grandfathering and associated media coverage may moderate near-term membership growth, we believe that un-grandfathering will provide us with more revenue to invest in our content to satisfy members, thus driving long-term growth,” wrote the company in the Q2 letter to shareholders.

Netflix CEO Reed Hastings put it even more plainly in Monday’s earnings call. “People don’t like price increases,” he said. “We know that. It’s a necessary phase for us to get through.”

Things aren’t all bad for Netflix, though. Not only does the company still lead its main streaming rivals, Amazon and Hulu, it has made and renewed solid content deals. When CBS’ new Star Trek series comes to TV, for example, it will stream on Netflix in nearly 200 countries, excluding the U.S. and Canada. Furthermore, the company was able to boast a new deal with The CW, multiple Emmy nominations (20 more than it pulled in last year), and progress penetrating overseas markets.

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Stephanie Topacio Long

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Stephanie Topacio Long is a writer and editor whose writing interests range from business to books. She also contributes to…

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