Netflix Increases Prices; Risks Losing More Subscribers For Higher Revenue
Netflix, Inc. reported that it is having a slash in membership and subscription. Many existing members are cancelling out.
The huge video streaming company reported that new subscribers only increased by 1.7 million. The projected amount was 2.5 million. In the United States alone, the company only gained 160,000 new subscribers. The release of the report led to a drop of Netflix shares by 14 percent.
In a videoconference call with analysts, Chief Executive Office Reed Hastings was apologetic, saying that "it is not easy for everyone." He said that many customers disliked the price increase but the "big picture is still intact."
According to Tony Wible, an analyst from Drexel Hamilton, that many are missing the "bigger picture". The analyst said that despite membership cancellations, Netflix is enjoying big revenue.
The company's profit is already at $2.11 billion. This is an increase of 28 percent in this quarter alone. Wible said that the profits will outweigh the loss of subscribers.
Netflix reported that the higher revenue is due to cheaper cost of sourcing materials. However, the small increase in subscribers is still bothersome to many shareholders.
Netflix now charging $9.99 a month for a subscription. HBO, on the other hand, offers about $15 a month for ad-free video streaming.
The video streaming giant is also facing tight competition from Amazon.com, Time Warner, HBO and Hulu. To remain fiercely competitive, Netflix also announced a recent partnership with CBS. Both companies signed off to the airing of the new "Star Trek" original series. The series will be seen in over 188 countries excluding the U.S. and Canada.
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