Cost-conscious consumers are the problem for Netflix

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

The giants of old media have in recent years made challenging Netflix a mission. Figures for the first quarter suggest they had some success: Netflix lost 200,000 subscribers, while Disney Plus added nearly 8mn new ones.

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

But data from Ampere Analysis suggest that instead of a new Pixar film or an HBO show luring viewers away, the pressure on consumers’ wallets was key to Netflix’s troubled quarter.

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

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

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

Many of those that left the streaming service were aged between 18 and 24, or in households with an annual income of less than $15,000, according to the analysis. About 49 per cent of the poorest households surveyed said they had a Netflix subscription in the first quarter, down from about 56.2 per cent in the previous year.

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

While the analysis suggests belt-tightening was the biggest drag for Netflix, questions over its content may also have contributed.

Ampere’s data point to Netflix suffering from a growing number of more fickle subscribers, or those who will cancel a subscription if they cannot find anything they want to watch, but are willing to join again when they hear of something they do.

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

Additional reporting and data visualisation by Steven Bernard