Netflix Predicts Slowing Subscriber Growth, Greater Churn Rate Due To Price Hikes Next Quarter

Netflix issued a stellar first quarter earnings report yesterday that trumped analysts’ expectations — though shares plummeted yesterday as the video giant warned of diminished subscriber growth in the second quarter.

Netflix reported revenues of $1.96 billion for the three months ended March 31, 2016 — an increase over $1.57 billion in revenues during the same quarter last year. The company also added 6.7 million memberships (2.2 million in the U.S. and 4.5 million internationally) — an uptick over the 6.1 million subscribers analysts had expected it would add.

Netflix ended the quarter with a total of 81.5 million members globally and said it will have 100 million subscribers by 2017, according to The Wall Street Journal

But looking ahead, Netflix expects significantly slower subscriber growth in the second quarter — to the tune of 500,000 stateside and 2 million internationally. This is due to the fact that many of the 130 countries into which Netflix said it would expand have already received the service. Adding more subscribers is also becoming more challenging, the Journal reports, as Netflix’s penetration continues to broaden.

Netflix aso warned that more subscribers might be cancelling their accounts in the second quarter due to a price increase initially announced last October, when its popular standard plan rose from $8.99 to $9.99. Subscribers who were grandfathered in at the lower rate will now start paying $9.99. However, Netflix said it would roll out these increases gradually over coming months.

Looking ahead, Netflix might be facing increased competition, as Amazon unveiled monthly subscription options for its Prime product, including an $8.99 monthly unlimited video streaming plan.

In order to keep its original content pipeline strong — which included hits last quarter like Making a Murderer, Fuller House, House of Cards, and Daredevil — Netflix said it would spend $6 billion on content in 2017, up from the $5 billion it intends to spend this year.