Netflix misses sign-up targets

Netflix added fewer new customers than it had previously predicted in its third quarter, causing the US web streaming firm’s share price to slump 25% in after-hours trading.

Announcing its Q3 results, Netflix said that domestically it added 0.98 million streaming customers in the quarter, and 2.04 million streaming customers. In its last earnings announcement it had anticipated net additions in these markets of 1.33 million and 2.36 million respectively.

Separately, year-on-year customer additions were also down from 1.3 million in Q3 2013 to 1 million in Q4 2014.

“As best we can tell, the primary cause is the slightly higher prices we now have compared to a year ago.  Slightly higher prices result in slightly less growth, other things being equal, and this is manifested more clearly in higher adoption markets such as the US,” said Netflix in a letter to its shareholders.

“In hindsight, we believe that late Q2 and early Q3 the impact of higher prices appeared to be offset for about two months by the large positive reception to Season Two of Orange is the New Black.”

Factoring in these “slightly higher prices”, Netflix said it now expects to add 1.85 million domestic streaming customers in Q4 2014, and 2.15 million international streaming customers.

“We remain happy with the price changes and growth in revenue and will continue to improve our service, with better content, better streaming and better choosing,” said Netflix.

“There is no change to our view on the long term attractiveness and US market size of Internet television, and no change to our view of the ultimate size of our US membership.”

Overall, Netflix ended the quarter with 37.22 domestic streaming customers and 15.84 international streaming customers.

Domestic streaming revenues grew 25% year-on-year to US$877 million, while international revenue grew 89% to $346 million – both were in line with forecasts. Net income came in at US$59 million, up from US$32 million for the same quarter last year.