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October 15, 2015

Netflix Viewer Growth Stalls in U.S., but Up Internationally in Q3

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Netflix recorded revenue of $1.74 billion and earnings per share of $0.07 in its third quarter, but slow U.S. sign-ups put a damper on its solid, but slightly-below estimated results.

Subscriber growth in the U.S. came in at 880,000, missing the company’s own forecast of 1.15 million and analysts’ estimates of 1.25 million.

Netflix-AppleTV-HiRes 2The news sent shares into a 14 percent freefall Wednesday in after-hours trading.

CEO Reed Hastings, in a letter to shareholders, said an inability to collect payment from a portion of U.S. customers “was driven in part by the ongoing transition to chip-based credit and debit cards.”

Hastings and Chief Financial Officer David Wells said during a video conference call that the new credit and debit cards designed to prevent fraud was a factor for both new sign-ups and current customers who had yet to update their account information.

The streaming firm, which also posted net income of $29 million, did post better numbers internationally, however. In fact, international subscriber growth surpassed the company’s forecast of 2.4 million to come in at 2.74 million.

Netflix plans to keep the momentum going to, with launches in Spain, Italy and Portugal in its fourth quarter. Expansion is also planned into South Korea, Hong Kong, Taiwan and Singapore in early 2016.

“Our plan remains to run around break-even through 2016 and to deliver material profits thereafter,” Netflix said in its report.

“Just three years into our originals strategy, we have come a long way and our content is increasingly recognized for its quality and breadth. This year, we garnered a Netflix-record 34 Emmy nominations, across 11 of our original series and documentaries and won four.”

Netflix was optimistic about its continued growth, however, citing its focus on producing its own quality content as a major draw for viewers. The company has allocated approximately $5 billion to produce original content in 2016.

The decision comes after the success of its Netflix Original series shows like Orange is the New Black, The Unbreakable Kimmy Schmidt, Marvel’s Daredevil and Sense8.

To help pay for the increased costs it will incur, Netflix had already announced the price for its most popular plan — which offers HD programming and two simultaneous streams for each customer — is going up by $1 a month, from $8.99 to $9.99.

The rate change is effective immediately for all new customers in the U.S., Canada and parts of Latin America. Existing customers have until October of 2016 before they must pay the increased rate.


Jennifer Cowan is the Managing Editor for SiteProNews.