Netflix Inc (NFLX)

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Cost-conscious consumers are the problem for Netflix
By: Financial Times | May 14, 2022

When Netflix revealed last month that it had lost customers for the first time in a decade, you may have expected competing streaming services to be jubilant.

In recent years, old media giants have made it a mission to challenge Netflix. First-quarter figures suggest they had some success: Netflix lost 200,000 subscribers, while Disney Plus added nearly 8 million new ones.

Even Netflix co-founder Reed Hastings, who for years has dismissed fears that rival services posed a threat, admitted that they have “some very good shows and movies.”

But data from Ampere Analysis suggests that rather than a new Pixar movie or HBO show drawing viewers in, pressure on consumers’ wallets was key to Netflix’s troubled quarter.

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In the two weeks after canceling their Netflix subscription, 87 percent of subscribers had not signed up for a rival service, according to the analysis, which is based on around 3 million US internet users. .

Richard Broughton, research director at Ampere, said that although there was an increase in churn rates earlier in the year, “there is no strong evidence to suggest that customers are turning away due to interest in others. [streaming video] services”.

The data suggests that a combination of higher inflation and a weakening stock market prompted consumers to tighten their budgets.

Many of those who left the streaming service were between the ages of 18 and 24, or in households with annual incomes of less than $15,000, according to the analysis. Some 49 percent of the poorest households surveyed said they had a Netflix subscription in the first quarter, up from 56.2 percent a year earlier.

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The loss of Netflix subscribers came after the company in January raised the US price of its standard plan by $1.50 to $15.49.

While the analysis suggests that belt-tightening was the biggest drag on Netflix, questions about its content may have contributed as well.

Ampere’s data suggests that Netflix suffers from a growing number of more fickle subscribers, or those who will cancel a subscription if they can’t find anything they want to watch, but are willing to join again when they find out about something they do.

Although it is an industry-wide concern, Netflix’s maturity exposes it more to this risk than the rest, Broughton said.

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