Entertaiment

Netflix shares fall 14% after it misses subscriber, revenue expectations

Netflix shares fall 14% after it misses subscriber, revenue expectations

The Netflix logo is pictured on a television in this illustration photograph taken in Encinitas, California, U.S., January 18, 2017.

Netflix stock is now in a free fall in after-hours trading.

Commenting on the reaction of shareholders Eric Schiffer, chief executive of private equity firm Patriarch, said: "Investors are devastated by Netflix's Q2 projection that went down in dramatic flames".

Shares of Netflix fell 13% today after it reported a surprise shortfall in subscriber additions for a second quarter marked by the lack of a blockbuster new show and the soccer World Cup.

The company has forecast a slower rate of household subscription growth during the current quarter.

In a research note, GBH Insights analyst Daniel Ives called the second-quarter showing "a near-term gut punch" to Netflix.

The streaming company said it had added 5.2 million subscribers in the three months to June 30, below analyst forecasts for 6.3 million subscribers and its own expectations. Netflix's marketing budget increased 92 percent since the same time past year, hitting $526 million for the quarter.

The good news is Netflix did see a 43% increase in streaming revenue likely from the higher subscriber numbers and new price increase. For the first time, Netflix generated more revenue outside the U.S.: global revenue totaled $1.92 billion and U.S. revenue was $1.89 billion for Q2.

According to The Associated Press, "The company gained 5.1 million subscribers worldwide during the quarter, more than 1 million below the number that management had believed it could". It is making a big push in India.

What is not clear is where the hurdles to that unbroken run of growth will come from, be it stronger competition from Amazon Prime or the changes in control of major film and TV franchises heralded by Walt Disney and Comcast's bid for Twenty-First Century Fox.

But it also faces growing competition. Apple Inc is pouring money into original programming, signing up A-list names including Oprah Winfrey.

Meanwhile, cable distributors are offering smaller and cheaper bundles of channels.

AT&T has just bought Time Warner in a deal that includes HBO - a pay TV and video streaming service that AT&T plans to expand in an attempt to lure more viewers away from Netflix. "Our strategy is to simply keep improving, as we've been doing every year in the past".