The culprit for Netflix’s (NASDAQ:NFLX) recent fall was the company’s underwhelming domestic subscriber growth. Domestic and international subscribers were up Q/Q by 2.1% and 11.8%, respectively. The performance was consistent with that of Q2 2015 where domestic and international subscribers grew Q/Q by 2.1% and 11.4%, respectively.

Netflix Needs More People

Management’s rationale for the domestic subscriber miss was “involuntary churn”:

In net additions they were down year-over-year, and that we explained and attributed to our involuntary churn or payments-related churn. We think partially that was due to the transition to the chip cards, which is still ongoing. And we’ve reflected that trend going forward into Q4 in our guidance.

Credit card companies are shifting to chip-enabled cards. If the expiration date, security code, etc. changed on the newer cards, the cards may not have worked properly. Customers may then have been required to manually enter their new information, and not doing so may have contributed to the involuntary churn. This rationale simply does not hold water, and management needs more people to corroborate its claims.

I Found This Odd For The Following Reasons:

Even if newer chip-enabled cards did not work, customers would have found a way to manually enter their credit card information if they wanted the service that badly. I have gotten new apartments where the first thing I set up was the cable – even before the furniture was installed. I could not live without ESPN, and watched it while organizing the furniture. When I was younger and cash-strapped, I tried to stretch my payables to stem cash flow. However, I always paid the cable bill on time; I was addicted to it.

Management’s argument is there may have been hiccups in the service, yet consumers didn’t frantically call to reconnect it. In my opinion, either customers are not “addicted” to Netflix much as we suspected or the domestic subscriber market has become saturated.