In July the company rejigged its prices and packaging, effectively raising the price for its top tier service by 60%. Company CEO, Reed Hastings, issued a statement yesterday saying that while its financial guidance remains unchanged, it is lowering subscriber forecasts in the wake of the pricing changes.
The company has lowered third-quarter DVD subscriber forecasts by 800,000, meaning it expects to have 15 million customers. It has lowered streaming subs forecasts by 200,000, meaning it expects to have 22 million customers. The company’s shares took an immediate hit following the new guidance. Management said it remained convinced that the price and package changes were the correct strategic move and the accordant revenue growth would actually allow it to license more content. Hastings said: “Despite the guidance revision, we remain convinced that the splitting of our services was the right long-term strategic choice.”
Hastings added: “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 downward revisions to subscriber forecasts were the second bit of bad news for the company, which has recorded an extraordinary upward trajectory in recent times, after premium cable channel Starz called off talks to have its content carried on Netflix.