LOS ANGELES • Netflix said on Wednesday that it lost US streaming customers for the first time in eight years and missed targets for new subscribers overseas, an announcement that jarred investors ahead of looming competition.
Netflix shares were down nearly 12 per cent in after-hours trading after the company posted quarterly results that showed it had shed 130,000 US customers.
The world's dominant subscription video service said it overestimated demand for new programming released from April to June and felt an impact from price increases in some markets.
Netflix reported that it added 2.83 million new paid streaming subscribers outside the United States, below analyst expectations of 4.8 million, according to IBES data from Refinitiv. Analysts had forecast a gain of 352,000 in the US.
"Our missed forecast was across all regions, but slightly more so in regions with price increases," the firm said in a letter to shareholders.
"We think Q2's content slate drove less growth in paid adds than we anticipated," it said.
Netflix has staked its future on global expansion and creating original TV shows, movies and documentaries to attract new customers and to keep the existing ones paying monthly subscription fees.
"Even though we expected slowing user growth in the US, a negative paid net additions number is shocking," said Mr Clement Thibault, an analyst at financial markets platform Investing.com.
"The problem is that with intensifying competition, there is no guarantee Netflix has the pricing power needed to raise prices without massively bleeding users."
Netflix raised prices in Britain, Switzerland, Greece and Western Europe during the second quarter.
Drop in Netflix shares in after-hours trading after the company posted quarterly results that showed it had shed 130,000 US customers.
The last time it lost US subscribers was in 2011, following an uproar over a price hike and a plan to split its DVD-by-mail and streaming services.
Looking ahead, Netflix projected that it will grow by seven million paid streaming customers in the third quarter, with help from a new season of supernatural thriller Stranger Things, released on July 4. That is more bullish than the 6.6 million forecast from analysts polled by Refinitiv.
But looming in November is the launch of Disney+, seen as a formidable entrant into the streaming market, and original programming from Apple. AT&T and Comcast Corp have said they plan their own offerings next year.
Netflix also faces the future loss of its two most-streamed shows. The Office will come off Netflix in January 2021 and head to Comcast's streaming platform, while Friends will end its run on Netflix at the beginning of next year. It will move exclusively to the upcoming AT&T service, HBO Max.
Netflix spent US$7.5 billion (S$10.2 billion) on content for last year and executives have said that amount will grow this year. Its debt has trebled since 2016 to US$10.36 billion last year.
Net income fell to US$270.7 million, or 60 cents per share, in the second quarter ended June 30 from US$384.3 million, or 85 cents per share, a year earlier.
Total revenue rose to US$4.92 billion from US$3.91 billion. Analysts on average had expected revenue of US$4.93 billion.
Netflix shares fell to US$320.66 in after-hours trading after closing at US$362.44 on the Nasdaq.