Netflix will see zero net addition to domestic paid subscribers according to estimates
Netflix, Inc.(NASDAQ:NFLX) shares plunged by 3.63% in early trading today after research firm M Science published less than flattering estimates for the online video streaming service. According to M Science latest research report based on churn figures for the months of July and August during the third quarter of the current fiscal year, Netflix will not record any additions to net paid subscribers.
This is significantly below management guidance of 400,000 and a consensus estimate of additions. According to the firm, the increase in churn is due to an increasing shift of grandfathered subscribers to $9.99 price points last month. Analysts at M Science are of the opinion that there is a strong possibility of nonstructural churn in price-affected subscribers going above 5.8% during the aforementioned months. The firm points out that this is the primary reason of domestic net subscriber addition for the quarter coming in significantly below consensus estimates and management guidance.
These numbers are a huge blow to Netflix, considering that it already witnesses major setbacks on the foreign front as well. Just yesterday, Netflix CEO Reed Hastings announced that Netflix is yet to see any progress in rolling out its video streaming service in China. Mr. Reed said that the company still hasn’t gotten an official license for the Chinese government which is crucial in order to start the service in the Mainland.
The CEO noted that at present it was difficult to lay out a specific timeframe when the company would be able to set footprint in China. Mr. Reed assured that the company would continue to make efforts in order to make the service available in China. On a positive note, the company also announced that its service in Poland would become more localized. Netflix will showcase several Polish shows in the country while also using local language and currency in providing its service.