During the first two quarters of the year, Netflix lost more than 1 million subscribers, and theories abounded as to why. Too much competition? Too much password sharing? Not enough Regé-Jean Page?
Sometimes the simplest answer is the best, however. Netflix raised prices this year, and amid an increasingly worrisome economic climate, the move may have significantly impacted subscriptions.
That’s one takeaway from a new report from Attest, a consumer research firm. It examined second quarter streaming in the United States and found that Netflix was the only streaming service to see a decline in second quarter. Perhaps not coincidentally, it was also the only one of the big services to institute a price increase. Netflix announced the bump in January and began implementing it in March.
“This may help to explain the subsequent drop-off in viewers on the platform last quarter, especially as wider inflationary pressures further reduced Americans’ purchasing power and disposable income,” says Jeremy King, CEO and founder at Attest. “With many other rivals potentially planning their own price increases in the future, the data ultimately shows how sensitive consumers currently are to even a small change in price. It also points to a potential end to Netflix’s monopoly over the streaming industry, with consumers reevaluating who deserves their business.”
Attest found that Netflix remained the most-watched platform out of 10 included in the survey, but there was a 1.5 percentage point decrease in the number of Americans watching the service at least once a week, down to 69.4%. It likely had nothing to do with content—the streamer’s blockbuster Stranger Things was the most popular program in the survey during second quarter.
That’s why pricing could be the magic answer. Inflationary pressures have changed consumer attitudes about spending. Inflation rose to 9.1% in June, a four-decade high. People have adjusted their spending habits to compensate, and the first things to go are extras for entertainment, which are easier to cut than your grocery budget or utility bills.
So, for instance, someone who sees the price increase for Netflix might look for a lower-priced service—and perhaps notice they can bundle Disney+, Hulu and ESPN+ for less than the price of an HD Netflix subscription. Of note, Disney+ was up 5.3 percentage points in the Attest survey.
Of course, change goes far beyond inflation. King observes that the current streaming environment is way different than it was even 12 months ago. That, too, plays into consumer decision making.
“The environment all streaming services find themselves in compared to last year has changed beyond recognition,” he says. “Competition has never been fiercer, and fundamental changes to business models once considered unthinkable are now becoming reality due to a much tougher economic climate, including Netflix’s soon-to-be-launched, ad-supported subscription plan.”
https://www.forbes.com/sites/tonifitzgerald/2022/08/10/how-much-did-netflix-price-increase-lead-to-s...
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