In 2022, after the release of its quarterly earnings report, Netflix stock plummeted. Color us surprised — but only because there had been clear signs for a long time.
A big part of the problem was simply that Netflix had been too successful. It had grown beyond any reasonable expectations in the places it was doing well (eg, USA). But it had seemingly lost its window to become a big player in the Asian streaming market.
But we are more interested in what current subscribers think. So a few years ago, we performed a couple of surveys to see what people were complaining about and why they were leaving.
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Price Hikes and Unsatisfactory Content
2019 has arguably been Netflix’s most challenging year since the streaming service became a standalone offering over 8 years ago. The streaming leader has struggled with slowing subscriber growth domestically all year while also bracing for increased competition from media and tech giants alike as services like Disney+ (which earned 10 million subscribers on its first day) and Apple TV+ have just launched and others from WarnerMedia (HBO Max) and NBC (Peacock) are on their way.
Furthermore, the streamer has also warned it will likely add fewer new subscribers in the fourth quarter of this year than it did last year, which isn’t surprising with the buzz around the shiny new, much cheaper Disney+ at the moment. And in an October 16th letter to shareholders, Netflix admitted it hasn’t been retaining US customers at its usual rate.
Why exactly is Netflix struggling to keep its customers? And what kind of subscribers are they losing?
We partnered with an unaffiliated third-party data analytics firm to survey over 1,000 customers who have canceled Netflix in recent months. Our goal was to figure out what types of people were leaving Netflix, why they canceled their service, and if they had any plans on returning in the future.
Here’s what we found:
Most Customers Who Canceled Netflix Had Been Longtime Subscribers
63% of those who unsubscribed had been using Netflix for more than a year.
In the second quarter of 2019, Netflix reported its first loss of domestic paid subscribers since 2011. Perhaps most troubling for Netflix is it seems to be driving away its most loyal customers. Our survey found the vast majority of customers who canceled service in recent months had been subscribed for more than a year. The next largest group of recent ex-subscribers was made up of those who had been using the service for 7 to 12 months. In fact, the smallest group of recent cancelers, at just 7%, was free trial users.
Most Subscribers Are Unsure If They’ll Return
While 58% of subscribers don’t know if they’ll sign up for Netflix again any time soon, 25% say they definitely won’t.
One of the great things about streaming services like Netflix is customers can drop the service and pick it back up at any time since there are no contracts. So, while it is worrying that Netflix is mostly losing some of its most loyal subscribers, there’s always the opportunity to win them back — at least some of them, anyway. 1 in 4 Netflix customers say they will not resubscribe to the streaming service in the near future, and only 17% say they’ll return for sure. Most subscribers (58%) just aren’t sure yet if they’ll come back, and given the most common reasons people ditched the service in the first place (more on this below), it’s no guarantee Netflix will be able to win them back.
Price Increases, Lack Of Quality Content, & Competition Are Biggest Reasons For Canceling
49.4% of those who canceled cited the latest price increase as a key factor.
In the eyes of roughly half of those who recently canceled Netflix, the service has simply gotten too expensive after its latest price increase back in May — the largest price increase the company had ever imposed on customers. Netflix’s most popular plan — its Standard offering — increased from $10.99 to $12.99 a month, while its Premium plan that allows 4K streaming on up to 4 devices simultaneously jumped from $13.99 a month to $15.99 a month. For many, the price hike was the final straw, especially at a time when new competitors were announcing cheaper pricing, like Disney+ at $6.99 a month with 4 simultaneous streams and 4K streaming, Apple TV+ at $4.99 a month, and NBC considering making its upcoming Peacock streaming service free for all.
But price isn’t the only major reason for customers leaving. 42% of those who have recently canceled indicated they aren’t pleased with Netflix’s current content slate which has been increasingly focused on its original series as the company has struggled to maintain rights to beloved licensed shows and movies
Meanwhile, 40% of recent former subscribers said they were subscribing to other streaming services instead, a challenge Netflix will continue to face as more competitors enter the marketplace.
Netflix Doesn’t Need to Panic…Yet
While Netflix is undeniably facing major domestic challenges as it tries to reach its eventual goal of 90 million US subscribers (it sits around 60 million at the moment), the company continues to grow rapidly internationally, bringing its total subscriber count to 158 million in over 190 countries worldwide.
Netflix will continue to grow in international markets in the coming months and years, which certainly provides a level of hope and optimism for the company. However, it cannot afford to ignore the increased domestic churn it’s facing domestically as more competitors with appealing, lower-priced offerings attempt to win over customers in the coming quarters.
Hastings has said that Netflix won’t lower its pricing in response to new services, so the pressure will be on to deliver content that both attracts and retains subscribers, making them feel the service is a good value even at its higher price point. To that end, Netflix continues to spend billions of dollars developing content to make customers stick around.
Will it be enough?
Notes about our survey:
Participant source: Amazon Mechanical Turk, only previous Netflix subscribers who canceled their subscriptions since April 1, 2019.
Sample size: 1,005
Sample details: Only US participants. Our sample has an appropriate distribution across age categories for streaming video users and representative gender distribution with 48% female and 52% male respondents. The fastest 5% of the sample were removed before analysis to ensure data quality (as they may have sped through without paying attention) resulting in a final sample size of N=1,005. Only mturk participants with a 99% or higher approval rating were permitted to take the survey.
Confidence Level: 95%; 3% margin of error.
1 in 4 Netflix Subscribers Think It’s Too Expensive
Netflix may have the most subscribers and may have a ton of popular original TV shows and movies, but that doesn’t mean that the streaming leader is without criticism. Above all else, one of the biggest points of contention subscribers have had with Netflix lately has been the consistent string of price hikes over the last few years. And now, it seems that a growing percentage of US subscribers are finding the service has simply gotten too expensive.
We surveyed over 1,000 current US Netflix subscribers, and 1 in 4 said Netflix has gotten too expensive. That represents nearly 15 million customers who think Netflix has gotten too costly, and with an increase in competition in the streaming industry, it’s a significant issue the company can’t afford to ignore.
A Look at Netflix Price Increases Over the Years
The history of Netflix price hikes is a long and storied one. When Netflix first launched its streaming video service in 2007, it was bundled along with its home DVD rental service for just $8 a month. Remember getting DVDs in the mail in those red paper envelopes? For most of us, that seems like another lifetime ago now.
In 2014, Netflix began offering different tiers of streaming-only service, with its Basic plan remaining at $8, its Standard plan going up to $9, and its Premium plan reaching $12.
In 2015, Standard would go up another dollar to $10.
By 2017, Standard plans had reached $11 and Premium had hit $14.
Finally, earlier this year, Premium shot up to $16, Standard reached $13, and Basic finally increased for the first time up to $9.
If Netflix‘s price points had stayed consistent with inflation since 2014, Basic service would be $8.64.99, Standard would be $9.74, and Premium would cost just under $13. Of course, Netflix has had to drastically shift its strategy in recent years, dumping billions upon billions of dollars into developing its original TV series and movies, and those costs have to get passed on, in part, to consumers.
While a $1 or $2 price increase every couple of years doesn’t seem like much, the reality is each subscriber has their own price threshold where the cost of the service exceeds its benefits.
Following those 2019 price hikes, a survey of Netflix subscribers found that 27% of subscribers said the raise in monthly price was enough for them to consider canceling their subscriptions. Of course, only a small percentage of that group probably actually canceled their service, but the fact still remains that if Netflix continues to get more expensive, it could reach a price point that finally drives subscribers away in droves.
Now, as Netflix is poised to face its stiffest competition ever as the long-awaited Disney+ is released later this year, we wanted to know how Netflix subscribers are currently feeling about the value they get from their subscription.
For this survey, we asked 1,004 current Netflix subscribers the following question: “What do you think of the current price you’re paying for Netflix?” Below are the results we received from the respondents:
- It’s a great value: 14.3%
- It’s reasonably priced: 61.4%
- It’s too expensive: 24.3%
According to the results we found, the vast majority of Netflix users think the service is reasonably priced. Still, nearly 1 in 4 subscribers think the big red streaming giant has gotten too expensive. 24.3% of U.S. subscribers represents nearly 14.6 million customers, meaning as soon as a comparable, less expensive option appears, a large portion of Netflix’s domestic consumer base could jump ship.
The streaming world is changing. As studios, media conglomerates, and tech firms have all begin launching their own services, many streamers are now forced to juggle multiple subscriptions in order to have access to all of the content they want to watch. And when you’re paying for a handful of streaming services, one that regularly increases in price eventually may not make the cut.
The content wars and constant price hikes now have some analysts wondering if the current streaming world has created an economic bubble. Will Netflix’s price hikes be the needle that pops it?
Notes about our survey:
Our sample has an appropriate distribution across age categories for streaming video users and representative gender spread of 51% male and 49% female respondents. The fastest 4 % of the sample were removed before analysis to ensure data quality (as they may have sped through without paying attention) resulting in the final sample size of N= 1,004. Only Amazon Mechanical Turk workers with a 95% or higher approval rating were permitted to take the survey and only those with at least 50 past tasks completed.
We’ve looked skeptically at Netflix here. But it remains the biggest streaming service in the world and will continue to be a major player in the industry.
It’s hard not to think that Wall Street hasn’t overreacted to recent news. The only thing that gives us pause is that Netflix seems more focused on marginal cost issues than on improving its content strategy.
Regardless, Netflix will continue to be an important part of the streaming world and very likely thrive in the future.
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