Netflix, Inc. subscriber growth in the quarter could not meet the expectations for which the firm put the blame on the payment miscues. And for this, the US firm is facing scepticism from the payments industry.
Blames payment industry for slow US growth
For the Q3, Netflix added just 880,000 subs in the U.S., which fell short of the firms forecasts by 270,000 subs. The U.S. streaming firm blamed the move by the U.S. banks to replace the credit and debit cards with a new computer chip-enabled cards. Netflix, Inc. said the move by the banks caused a lot of problems in payment processing, which led to several involuntary service cancellations.
Netflix provided more detail on Thursday, when it said that up to half of its users were required to update their billing information when their cards were upgraded.
However, the people in the payments industry claim that the systems deployed are capable of preventing any such billing disruptions, says a report from the WSJ.
Henry Helgeson runs a firm that processes transactions for small businesses. Referring Netflix’s explanation as ‘curious,’ the expert said that no other merchant made any complaint about such a problem. “I would be surprised if this was an issue in the industry right now and we’re only hearing about it from Netflix,” Helgeson told the WSJ.
Global expansion, a lifeline for Netflix
Netflix’s dismal U.S. growth lead to a sharp decline in the shares. On Thursday, Nomura senior analyst Anthony DiClemente said the firms prospects overseas and the draw of its original content are the big drivers for the stock.
On Wednesday, the firm said it added a net 2.74 million new international subs in Q3, and this was higher than the internal estimates for 2.4m and 2.04m a year earlier. Netflix, Inc. will soon debut its services in Spain, Italy and Portugal, and in 2016 will enter South Korea, Hong Kong, Singapore and Taiwan.
“Really, that’s the story of the stock. It’s the international expansion, the global scale,” the analyst told CNBC’s Squawk Box.
In pre-market trading today, Netflix shares were down 1.23% at $99.85. Year to date, the stock is up over 106% while in the last one-year, they are up almost 57%.