Despite more original fare, Netflix shares drop on sluggish subscriber growth

Even though it produced more original programming than HBO last year, Netflix forecasts that its subscriptions will grow at a slower pace  this quarter than what investors had expected.

Steve Marcus/Reuters/File
Reed Hastings, co-founder and CEO of Netflix, delivers a keynote address at the 2016 CES trade show in Las Vegas, Nevada in January 2016.

Streaming video service Netflix Inc. surpassed the number of original programming that HBO produced in the same year, but that still hasn't prevented its subscriber growth falling short of Wall Street's expectations.

The company has been increasing its original content since it debuted its famous shows "House of Cards" and "Orange is the New Black." Last year it produced 450 hours of original programming, 50 more hours of original content than produced by HBO, the leading premium cable network. And Netflix’s original content has won the hearts of many, earning the title of the network that produces the best original programming, according to a recent Morgan Stanley survey. About 29 percent of survey respondents said Netflix was best in original programming, compared to 18 percent who picked HBO.

Netflix has also increased the number of its subscribers since launching worldwide. The company reached a total number of 34.53 million international subscribers last quarter. Netflix signed up 4.51 million international subscribers in 130 countries this past quarter, bringing the total worldwide subscribers to 81.5 million.

But despite the popular original shows and increased subscribers, the company disappointed investors with its forecasts for the second quarter of 2016. Netflix's forecast for the next quarter shows a weaker subscriber growth, especially for markets outside the United States. The company projects that it will add 2 million new international customers, almost 1.5 million short from the 3.45 million subscribers that analysts had estimated, Bloomberg reported. In the United States, the company expects to add 500,000 more subscribers in the second quarter, numbers that also fall short of the 585,000 that Wall Street analysts had forecast. The weak forecasts sent the company’s shares tumbling 8 percent in after-hours trading on Monday.

The company has attributed the weak international forecasts to language barriers. Although Netflix recently launched in 130 countries worldwide, its content isn't available in local languages. The company has yet to launch in China, and says that the Chinese market may be able to boost its growth in the future.

"Over the next couple years as we further localize, we'll be able to see more opportunity," Netflix Chief Executive Reed Hastings told analysts, Reuters reported.

Netflix now faces tougher competition for its subscribers from Amazon, after the company unveiled two monthly subscription plans Monday. Amazon's $8.99 plan will be cheaper than Netflix’s standard plan which is set to increases to $9.99 in May.

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