Netflix blames 'involuntary churns' for dive in profits
Netflix reported a lower than expected performance today after the company reported a total revenue of $1.74 billion for its third quarter performance. The revenue contributes to earnings of $0.07 per share, which is lower than analyst expectation of $0.08 per share.
Following the news, Netflix shares also dropped to almost 10 percent on the same trading day according to TechCrunch. According to the company, the low report is due to the lower number of subscription in the third quarter, especially from the US subscriber.
According to its previous target, Netflix is planning to add around 1.15 million new subscribers for the third quarter. However, the company only managed to obtain 880,000 subscriptions from the US alone which is also a drop compared to its third quarter subscriber for 2014 which is around 980,000 according to The Wall Street Journal. The drop in the US subscription is mainly due to many rival in the online video streaming business including Hulu and Amazon which is Netflix biggest competitor.
Netflix subscription from outside the US, on the other hand, increases up to 2.74 million which is 3.4 million higher than expected. The increase in subscription could be linked up to the company's latest move to finally open Netflix in Japan.
Business Insider reported that Netflix blames the "involuntary churn" for its subscription loss. According to the letter to shareholders, Netflix said that the drop occurred because many of its current subscribers forgot to update their credit card with Netflix after their respective banks update their customers' database. According to Netflix, some of its subscribers might have different credit card numbers after bank update causing Netflix unable to renew the subscription of some of its subscriber.
Netflix also reassures its shareholders that the number of subscriptions will not fall much lower and it is expecting to obtain the same number of subscribers as it received at the end of 2014. The company also reassure its investor and was quoted to say in a statement that "This would mark the 4th consecutive year we've added about 6 million members in the US."
Netflix is planning to get its service to more countries by the end of 2016 especially in the growing countries across Asia. The company will start to offer services in South Korea, Singapore, Hong Kong and Taiwan once its Japan headquarter is ready as it is planning to make Japan as its centre in Asia.