In its quarterly investor relations call on Wednesday, Netflix announced that it has added over 3 million new subscribers — it added 5 million subscribers in the first quarter of this year and 3.3 million in the second — an increase it was able to predict within a 2% margin of accuracy this time around. Netflix now has a 69.17 million paying subscribers to date, and the growth shows no signs of slowing.
Except at home, that is.
In the U.S., Netflix added 880,000 new subscribers. A significant number, but well under the company's 1.15 million prediction. It's not bad news, exactly; it means that Netflix overperformed internationally, and Netflix blamed the slowing domestic growth on an unusually high number of unpaid accounts — what it calls "involuntary churn." In the livestream of the quarterly report to investors, Netflix CFO David Wells blamed the inability to collect from subscribers on the recent shift to chip-inclusive credit cards.
Netflix's stock dropped as much as 14% after the company released its quarterly results.
Wells made it clear that he didn't believe that the cancelled subscriptions had anything to do with the price hike Netflix announced last week.
While its most popular subscription plan — high definition streaming on up to two screens at once — is getting its second $1-per-month price hike in less than two years, up to $9.99, CEO Reed Hastings said that it was not correct to think of it as Netflix getting more expensive. "Netflix is $7.99, as always," he said. "This is putting in a good tiering mechanism." Hastings also reminded viewers that Netflix's version of "standard definition" is "DVD quality, it's not low quality."
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Netlfix's international subscriber base increased by 2.74 million in the past three months, beating the company's prediction by more than 300,000. The high growth numbers reflect Netflix's expansion into new markets, and both Hastings and Chief Content Officer Ted Sarandos cited the new original series Narcos as an example of how Netflix can tap into a worldwide sensibility — it's a French-produced show, with a Brazilian star and director, spoken largely in Spanish. According to Netflix, which never releases viewership numbers, it has been a unmitigated success — no surprise given that Narcos was renewed for a second season less than a week after it premiered.
Sarandos also mentioned new content formats Netflix would be rolling out, citing Chelsea Handler's upcoming talk show for the streaming service. The talk format — often recorded live and typically based on the news of the day — is something that on-demand media has shied away from. In addition, Hastings asked Sarandos what the possibility is that Netflix will become a competitor with VICE — a media company known for its investigative news videos and weekly HBO series — in the next one or two years.
"Probably high," said Sarandos.
