Netflix shares drop on lower than expected subscriptions

Netflix has forecast its subscriptions in the US and outside the country to be slower than what is expected in this quarter. The company is expected to add about 500,000 customers in the US in the second quarter of 2016 as opposed to the Wall Street target of 586,000. This was due to the "modest impact" of the price increase for its monthly movie and TV subscriptions, the company said.

Netflix is expected to add about two million subscribers coming from markets outside the US, as opposed to the 3.5 million subscribers analysts expected.

The company has expanded its streaming services at a reasonable subscription cost in different markets across the globe. At the CES 2016 event in January, the company's chief executive officer Reed Hastings announced the wider availability of the service in 130 countries globally, with China an exception.

Hastings said the initial sign-up was limited in some countries as the service offers content in English language and does not accept local payment options. "Over the next couple years as we further localise, we'll be able to see more opportunity," Hastings told analysts on a conference call. As for the Chinese market, the company said it was "continuing discussions", according to a Reuters report.

A spokeswoman for Netflix reasserted the company is still sticking to what it promised earlier about the material global profit in 2017. "I think that people who relied on unbridled international growth are beginning to have second thoughts, and the company now faces domestic competition that may limit its ability to grow domestic profitability," said Michael Pachter, Wedbush Securities analyst.

The company will increase the rates for more than half of the US members starting from May. "We are rolling out slowly over the year rather than mostly in May, so we can learn as we go" said the company.

It is also likely to make investments on movie and TV content from about $5bn (£3.5m) in 2016 to over $6bn in 2017. It has added 6.7 million subscribers in between January and March, which makes it a total of 81.5 million globally.