Netflix’s price increases scared people away from the streaming service, and the volume of unsubscribed surprised Jim Cramer.
“Something happened here where people decided that content wasn’t worth paying for,” Cramer said Tuesday on “Squawk on the Street”, a day after the company reported that it missed its subscriber goal in the second quarter. “I would never in a million years say I’m not paying the additional couple [of dollars].”
The entertainment-streaming service missed its subscriber goal of 2.5 million in the second quarter. Netflix reported 1.7 million new subscribers and beat earnings estimates. Netflix blamed the dismal results on from longtime subscribers cancelling their accounts amid price increases.
Netflix’s stock plunged more than 13 percent Tuesday. Shares have dropped nearly 25 percent in the past year.
“I think this was a quizzical call,” Cramer said of the company’s move. “I think they are busy trying to figure out what really went wrong.”
Netflix plans to continue to raise prices for longtime users who were temporarily grandfathered into the cheaper pricing structure, which will increase Netflix’s revenue in future quarters.
“People don’t like prices increases. We know that. It’s a necessary phase for us to get through. And with the increases revenue, we’re continuing to invest in better and better content,” Netflix CEO Reed Hastings said in a conference call with investors on Monday. “That’s what makes us feel strong and positive about the long term. This is a short-term phenomenon.”
Analysts said the company’s long-term goals may be doable, but changing the subscription prices may have had an impact on Netflix’s second-quarter performance.