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Netflix CEO Reed Hastings speaks at the Consumer Electronics Show (GeekWire photo)
Netflix CEO Reed Hastings speaks at the Consumer Electronics Show (GeekWire photo)

Netflix reported its weakest subscriber growth in two years, causing its stock to drop more than 15 percent in after-hours trading.

The company said today in a letter to investors that global membership grew by 1.7 million members in the second quarter, well below Netflix’s expectation of 2.5 million new members, and the lowest figure since the second quarter 2014.

Netflix now has more than 83 million members worldwide.

In the U.S., Netflix added a net of 160,000 members versus the forecasted 500,000. And internationally, Netflix added 1.52 million members, down from its forecast of 2 million.

“We are growing, but not as fast we would like or have been,” Netflix CEO Reed Hastings wrote in the letter to investors. “Disrupting a big market can be bumpy, but the opportunity ahead is as big as ever and we continue to improve every aspect of our business.”

Netflix said it added about as many members as it expected, but lost more members than anticipated as a result of reports of its plans to “un-grandfather” longer-tenured members to its new price of $9.99 per month.

Netflix posted a profit of $40.8 million, or earnings per share of 9 cents versus Wall Street forecasts of 2 cents. Its revenue this quarter was $1.97 billion versus forecasts of $2.11 billion.

In the third quarter, Netflix expects a net increase of 300,000 U.S. members and 2 million more internationally.

Netflix’s rough quarter comes as Amazon has upped its streaming game, announcing in April it would offer a standalone subscription to its Amazon Video streaming content. Amazon prices the service at $8.99, $1 less than Netflix’s monthly charge.

But Netflix said in its letter that increased competition from Amazon and Hulu was not the problem.

“Our view, however, is that we are all growing primarily against linear TV hours and that competition did not contribute materially to our miss in Q2,” according to the letter.

Perhaps the biggest story of over the next couple quarters for Netflix is a deal with Comcast to make the streaming service part of the X1 platform.

Under the new arrangement, Netflix would be incorporated into the set-top box as an app, similar to how it appears on other devices (like Roku and Apple TV). The deal is significant because Netflix has been a vocal critic of Comcast, saying the broadcast giant violates net neutrality.

Hastings said the Netflix-Comcast integration will be complete in the second half of this year.

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