Netflix’s stock price has dropped 10% due to its failure to meet revenue expectations and contentious decision to increase prices by splitting its unlimited DVD by mail and online video streaming plans into two.
While second-quarter revenue rose by 52%, third-quarter projections are off significantly from previous $846.5 expectations, with the company anticipating actual revenue during the period to be somewhere between $799.5 to $828.5 million. Admitting a slowdown in new subscriber growth, the online video service also confesses that shoppers’ negative reaction to recent price hikes will continue to affect its earnings going forward.
Attempting to allay public fears, Netflix spokesmen say that the price hike, which will extend to existing users in September, will only cause a minimal number of cancellations or downgrades in service. But online forums continue to churn with comments from disgruntled viewers upset at the idea of paying $7.99 each for DVDs by mail or online streaming, especially given the service’s less robust digital catalogue.
“It is expected and unfortunate that our DVD subscribers who also use streaming don’t like our price change, which can be as much as a 60% increase for them from $9.99 to $15.98, when it goes into effect for each subscriber upon their renewal date in September,” said the company in a public letter to investors. “We hate making our subscribers upset with us, but we feel like we provide a fantastic service and we’re working hard to further improve the quality and range of our streaming content in Q4 and beyond.”