People really don’t like paying more for their Netflix rentals.
Netflix’s 60 percent price hike -which went into effect on Sept. 1, the same day that the one of the company’s main content providers, Starz, walked out on contract renegotiations- seems to be having a more profound effect on the company’s business than it anticipated.
According to an updated third quarter guidance document addressed to shareholders and posted on the company’s website Thursday, Netflix is lowering its Q3 prediction for the total number of domestic subscribers from 25 million to 24 million.
That biggest drop-off Netflix expects to see is in DVD-only rental plans, down by 800,000 subscribers. Interestingly, the number of subscribers continuing to pay the additional 60 percent price of $15.98 for both DVD and streaming video rentals remains unchanged in this projection at 12 million.
Netflix also noted that it still expects to earn just as much as it previously predicted in July even with fewer subscribers, thanks to the new price hike.
“We know our decision to split our services has upset many of our subscribers, which we don’t take lightly, but we believe this split will help us make our services better for subscribers and shareholders for years to come,” the note concludes, signed by CEO Reed Hastings and CFO David Wells.
Still, investors didn’t seem to be comforted by the note, with Netflix stocks plummeting over 13 percent in morning trading.
And with surprisingly fierce competition from Walmart’s Vudu service, it’ll be interesting to see how Netflix guards its spot at the top of the video rental charts.
Correction: This article originally misstated the numbers of Netflix subscribers in the projections as 37 million and 36 million, respectively. It has since been corrected. We regret the error.
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