Netflix underestimated the effects of its price hike

Netflix seems to have misjudged the impact raising its subscription prices would have as it reported lower than expected new member numbers today.

The streaming service thought it would add 2.5 million net new members over the last three months, but only managed 1.7 million. It hit its gross additions target, but was struck by churn - the exit of existing members - that "ticked up slightly and unexpectedly."

Netflix said in a letter to shareholders that this drop was kind-of, sort-of the result of press coverage of its un-grandfathering efforts to move members off its old pricing structure and onto its new, more expensive one. It's always the media's fault, right?

Netflix has introduced higher subscription prices over the past 2 years, but delayed the $1 increase for some members. Those price hikes finally started hitting the last holdouts a few months ago.

"We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering," Netflix wrote.

Those who gutted out the price hike aren't leaving, the company noted, it's just the ones who thought their prices were going up (which they were) and decided not to wait for that to happen, or left shortly after.

Not worried, yet

The company, which remains the biggest player in the streaming place, is taking a long view of the situation, noting that while "un-grandfathering and associated media coverage may moderate near-term membership growth, we believe that un-grandfathering will provide us with more revenue to invest in our content to satisfy members, thus driving long-term growth."

Netflix isn't wavering from un-grandfathering and plans to complete it this year, bringing everyone in the US to its $7.99 SD, $9.99 HD and $11.99 UHB per month price structure.

Its stock plummeted when the earnings report came out, and is still down in after-hours trading.

Netflix

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