netflix Higher prices make Netflix customers cancel and stocks to dive

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Netflix released its earnings report for the second quarter today. The company was one of 2015's best performing stocks, but has seen its share price stumble in recent months on projections of slower growth. Today it reported $1.97 billion in revenue and net income of $41 million. Adding to worries about its growth, the company added just 1.54 million subscribers, well below its own projections of 2.5 million new customers. The stock is down around 14 percent in after-hours trading.

In its letter to investors, Netflix blamed the weak subscriber growth on churn, meaning older customers exiting. "Our global member forecast for Q2 was 2.5m and we came in at 1.7m. Gross additions were on target, but churn ticked up slightly and unexpectedly, coincident with the press coverage in early April of our plan to un­grandfather longer tenured members and remained elevated through the quarter," Netflix wrote. "We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering."

The company stuck to its guns on the price hikes, writing that "while un­grandfathering and associated media coverage may moderate near­ term membership growth, we believe that un­grandfathering will provide us with more revenue to invest in our content to satisfy members, thus driving long­term growth."

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