Streaming entertainment giant Netflix says it has lost some “longer tenured members,” due to the end of the two-year grandfathering period which recently saw long-time subscriber’s subscription fees rise to the same level as newer subscribers.
In its letter to investors, Netflix blamed the weak subscriber growth on churn, meaning it is seeing some of its older customers cancelling the service. “Our global member forecast for Q2 was 2.5m and we came in at 1.7m. Gross additions were on target, but churn ticked up slightly and unexpectedly, coincident with the press coverage in early April of our plan to ungrandfather longer tenured members and remained elevated through the quarter,” Netflix wrote in a recent letter to investors. “We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering.”
The company reported $1.97 billion in revenue and net income of $41 million. The company added just 1.54 million subscribers, coming in well below its own projections of 2.5 million new customers.
The company plans to keep steady as she goes, and not make any changes in its pricing to lure those lost customers back into the fold:
While ungrandfathering and associated media coverage may moderate nearterm membership growth, we believe that ungrandfathering will provide us with more revenue to invest in our content to satisfy members, thus driving longterm growth. Over the second half of this year, we’ll complete ungrandfathering. Our threetier pricing (in the US: $7.99 SD, $9.99 HD, and $11.99 UHD) is working well for us and for new members, and our gross additions remain healthy.
The company’s U.S. numbers may improve in the near future, as it has recently made an agreement with cable company Comcast to give the streaming firm access to its subscribers via the cable giant’s X1 box. However, Netflix wrote it “does not include any boost in the US from the Comcast X1 launch due to uncertainty on timing as we and Comcast will only release Netflix on the X1 when the viewer experience is great.”
(Via The Verge)
