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Netflix is blaming disappointing US subscriber growth on the transition to chip-based credit and debit cards. These new cards are designed to combat fraud, but apparently are also wreaking havoc on Netflix’s payment system.
In a letter to shareholders, Netflix said its forecast for the third quarter was off due to higher-than-expected “involuntary churn” because of the transition in the US to a different credit-card technology.
According to Netflix, those new credit cards often have a new number or expiration date, requiring subscribers to update their payment information online in order for their subscription to continue. During its earnings call with investors Wednesday, Netflix said the new credit-card rollout was only a third of the way completed, which means it will be an ongoing issue.
Netflix gained 880,000 US subscribers during the third quarter, lower than expected by analysts. Wall Street expected domestic subscriber growth to be around 1.25 million, according to an average compiled by Bloomberg.
Netflix says that in terms of net additions to its US subscriber base, through the first nine months of 2015, it is “slightly ahead of prior year.” Netflix expects to finish 2015 at around the same level as 2014.
“This would mark the 4th consecutive year we’ve added about 6 million members in the US,” the letter says.
Netflix stock plunged after market close.
International subscriber growth, however, was above estimates. In the international arena, Netflix’s subscription base grew by 2.74 million, well above the 2.45 million predicted by analysts, according to Bloomberg.