Netflix blames weak U.S subscriber adds on new chip-based cards
By Jessica Toonkel and Anya George Tharakan
(Reuters) - Video-streaming service provider Netflix Inc reported third-quarter U.S. subscriber additions below its own forecast, blaming a transition to chip-based cards for the miss.
Shares of Netflix, known for its original shows such as "House of Cards" and "Orange is the New Black", plunged about 15 percent after the bell, before clawing back to trade down 2.4 percent.
U.S. credit and debit card companies have been shifting to chip-enabled cards ahead of the Oct. 1 deadline mandated for the switch.
For Netflix, the switch meant that many of the older cards on its file no longer worked as the companies gave new cards to their customers, leading to "involuntary churn," as Chief Executive Reed Hastings put it in a letter to shareholders.
"It's just the dumbest thing I've heard," Wedbush Securities analyst Michael Pachter said.
FBR Capital Markets analyst Barton Crockett said the issue around the chip cards is particularly confusing, given that these cards have been around for a bit.
"It begs a million questions," he said.
Netflix said on Wednesday it added 0.88 million U.S. subscribers in the third quarter ended Sept. 30, compared with its forecast of 1.15 million. Continued...