Streaming colossus Netflix has announced its earnings for the second quarter of 2016, revealing user growth below expectations.
In a letter to shareholders, the company confirmed that it wasn’t growing as fast as it wanted to.
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“We grew by 1.7 million members in Q2 finishing with over 83 million members. This is below our forecast of 2.5 million net new members and our prior year Q2 net additions of 3.3 million,” the company wrote.
Netflix largely blamed the loss on moving so-called grandfathered users (subscribers who were still on older, cheaper price plans) to the updated plans.
“We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering,” the streaming service explained, saying that changes among normal users were in line with expectations.
The company added that its three-tier pricing system “was working well”.
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The company saw international revenue shoot up by 67% year on year, owing to a slew of new regions being supported. But what about international user numbers?
“International net additions in Q2 came to 1.5 million compared to our 2.0 million forecast,” Netflix elaborated, saying that “ungrandfathered” users in Canada, the UK, Ireland and several other regions were to blame.
Jonathan Broughton, senior analyst at IHS Technology, explained that Netflix will have a tougher time in global markets.
“International markets are more competitive, especially in important countries such as the UK, where Amazon and NowTV offers are increasingly well targeted to lower-end consumers. However, in the Nordic region, Netflix is still growing very strongly and is expected to be taken in more than 50% of households by the end of 2017.”
Broughton added that the company has been slow to invest in international content, leading to “stalled” growth in these markets.
Nevertheless, Netflix is still on the right path, the analyst concluded.
“Although subscriber growth slowed substantially, the service is still growing. As the majority of churned customers are resultant of grandfather deals, and gross additions were on target, IHS expects Netflix to return to strong growth in the near future.”
