The price of Netflix is driving people away

Shares were down 13% as cancellations increase...

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Image: Paul Sakuma / AP/Press Association Images

Netflix announced that it performed below second quarter expectations on Monday, causing shares in the video streaming to plunge 13% in late trading.

Price hikes for the subscription service contributed to the company failing to add 2.5 million new users.

It added 1.7 million customers in the second quarter on a net basis instead.

International growth was at its lowest rate since the same period in 2014, with 1.52 million new subscribers, while just 160,000 new US customers came onboard, the lowest such quarterly total since Netflix began reporting the figures in 2012. 

Netflix itself has blamed as recent price increase of $1 or $2 per month for existing customers on increased cancellations.

The rate of cancellations "ticked up slightly and unexpectedly" in early April, which the company attributed to press coverage of the rising monthly costs.

CEO Reed Hastings said:

"We apologise for the volatility. I know it's not easy for everyone.

"The big picture is very much intact, and we're very excited about it, and so we're continuing to execute on growing the business."

This quarter, Netflix is factoring in "an impact from the spectacle of the Olympics" as it forecasts 300,000 new US subscribers and 2.3 million net new customers in its overseas markets.

In its investor letter, Netflix also touched on its continuing efforts to move into the Chinese market.

"Unfortunately," the letter stated, "this year the regulatory climate in China for our service has become more challenging."