US credit and debit chip transition blamed for Netflix growth slump

Netflix shares have dropped by seven per cent after the company announced it had missed third quarter growth targets.

The video streaming company added only 800,000 subscribers to the mix in the US, down from 980,000 in the same window one year earlier – way below the forecast of 1.15m sign ups.

Netflix chief executive Reed Hastings has offered up an interesting excuse for this shortfall – an “involuntary churn”.

The earnings statement read: “Our over-forecast in the US for Q3 was due to slightly higher-than-expected involuntary churn (inability to collect).”

In short, this slump has been attributed to a number of customers being sent new credit cards, some of which have new numbers.

Failure to update the payment details would result in a default on the account – and Netflix is claiming this issue is given users the perfect window to quit the service.

If this excuse is indeed as far reaching as Hastings claims, other monthly subscription digital services will report similar disappointments in their earnings.