Netflix shares dive on forecasts, Amazon moves

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Netflix shares took a beating on Monday after the company forecast lower than expected Q2 subscriber gains and Amazon announced a move into the monthly subscription business.

The streaming giant, which expanded into 130 new territories in January, said it expects to add around 500,000 subscribers in the US and 2 million outside the US in the second quarter of 2016. Wall Street analysts had forecast 586,000 in the US and 3.5 million internationally.

However, second quarter subscriber growth will be hit by Netflix’s planned price hike from current packages of $7.99 or $8.99 a month to $9.99 a month, starting from May. The company’s shares fell by as much as 12% in after-hours trading on Monday (April 18) after it issued the weaker than expected subscriber forecasts.

First quarter subscriber gains were in line with expectations – Netflix added 4.51 million international subscribers in the first quarter of 2016, compared to 4.04 million in the last three months of 2015, before its international expansion.

US subscriptions were up by 2.25 million in the first three months of 2016, similar to growth in the first quarter of last year. In total the streaming giant now has 81.5 million subscribers across 190 territories.

Meanwhile, competitor Amazon Prime Video announced on Monday that it has launched a monthly subscription package that costs $8.99 a month and does not require consumers to pay for the annual $99 Amazon Prime package.

Amazon has also drawn attention to its content credentials over the past week, unveiling a slate of high-quality films at CinemaCon and reassuring US exhibitors that it intends to include theatrical windows in its distribution plans.