Netflix Claims Credit-Card Chips Messed Up Its Growth

Not everyone is buying finger-pointing at new fraud-prevention technology
By Jenn Gidman,  Newser Staff
Posted Oct 15, 2015 7:23 AM CDT
Netflix Claims Credit-Card Chips Messed Up Its Growth
This March 20, 2012, file photo shows Netfilx headquarters in Los Gatos, Calif.   (AP Photo/Paul Sakuma, File)

Everyone who is too lazy or forgot to update their credit card numbers online can blame themselves for Netflix's slow US subscriber growth. That's the company's excuse, anyway, revealed in a Wednesday letter to shareholders that says it didn't hit its subscriber growth forecast partly due to a change in credit and debit cards that took effect Oct. 1. The change requires card companies to switch to cards with a special fraud-prevention chip, and the letter notes that the 880,000 subscribers gained in Q3 were fewer than the forecast of 1.15 million "due to higher-than-expected involuntary churn (inability to collect), which we believe was driven in part" by the move to these chip-based cards. "There was a relative surge we didn't anticipate correctly," CEO Reed Hastings tells Bloomberg.

"It's a minor tactical issue," he continues. "We'll be through it in a couple months. Next year everyone will have chip-based cards." Not everyone is buying the new-technology excuse, though. "It's just the dumbest thing I've heard," one analyst tells Reuters; another adds that the cards have been around for some time and that Netflix's rationalizing "begs a million questions." Wired calls the reasoning a "head-scratcher" and notes many new cards keep the same number on file as the old one and that during the transition, cards often have a grace period in which they keep working until the new numbers are entered. But Netflix CFO David Wells insists it's enough of an issue to exacerbate the "friction of renewal," noting "it's not consistently the case" a new card will keep its number, the Wall Street Journal reports. (Read more Netflix stories.)

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