Commentary

Can Netflix Hang On To Its Millennials?

Whenever Netflix announces its latest set of figures tonight, you know the numbers are going to be impressive. The digital streaming service already reaches nearly one in four American adults and will no doubt unleash another huge subscription number tonight.

And subscription figures are where it's at for Netflix because it offers a very simple buffet style, all you can eat, model where subscribers pay a monthly fee for access to everything. There are no adverts and so its financial success relies solely on rising its monthly fee or the number of people paying that fee, or both.

What is hugely interesting is the differences between the U.S. and U.K. businesses picked up by online audience measurement company, Verto. Its figures show that Netflix saw an additional 1.8m visitors between March and June this year. In the U.S., the company believes Netflix has increased male sign-ups by 14% and has increased its 35-44 account holders by 27%, albeit alongside a 19% decline in 18 to 24 year olds. 

In the U.K., it's a very different story. The service is not quite as sticky, with 14% of British subscribers using the service daily, compared to 19% in the US where subscribers also spend nearly double the amount of time watching content, 183 minutes per month vs 97. As for demographics, the big takeout is that while Netflix's appeal with 18 to 24 year olds would seem to be declining, in the U.K. that same age group accounts for a quarter of its adult audience. 

In the U.S., then, its core growing market is people who have settled down and are approaching middle age. In the U.K., it's comparatively far stronger with millennials, or should that be a crossover between millennials and post-millennials?

The appeal to people of university and first-jobber age is very clear. Who wants to be in on a Saturday night watching linear TV when it can be viewed on a lazy Sunday morning instead?

The question is, who's paying the bill? Surely nothing beats non-linear TV as a streaming service that comes for free, because the bank of mum and dad are paying? I remember actually doing a "lol" for real when I saw a meme mirroring the welcome screen for Netflix with four characters -- Bill Payer, Parasite #1, #2, #3. Don't know about you, but that's certainly how it is in this household, although we've yet to have any children leaving the nest to study or carve out a career from their own pad. 

When they do, it's going to be very interesting. Will they take out their own subscription? Having a millennial and post-millennial audience puts Netflix in a very enviable position. But will that audience, which has grown up on the free internet, take out their own subscriptions? 

It's a fundamentally important question because Netflix is obviously a huge hit, an amazing media sensation. But as The Telegraph reports today, its share price over the weekend, before tonight's announcement, values the company at 200 times earnings. It also points out, though, that only 5% of its subscribers are likely to end their subscription in any given year and attempts by Apple and Amazon to break the streaming market have done little to hold back its ever-upward rise.

So, investors are taking a gamble that an ad-free streaming service will continue to add new countries and subscribers while a churn rate of 5% stays constant. I wouldn't bet against the service doing this but the one question for the U.K. is going to be whether a strong Millennial audience will grow up and start paying for the service themselves and then keep paying for it? It's not such an issue in the US where the service appeals to an older age group.

In the U.K., though, people are leaving the nest later as house prices make going independent increasingly difficult. When they do, will Netflix make the leap with them? Or will the U.K. see a millennialdrop for Netflix as has occurred in the U.S., according to Verto's figures?

2 comments about "Can Netflix Hang On To Its Millennials?".
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  1. Paula Lynn from Who Else Unlimited, July 17, 2017 at 11:30 a.m.

    18-34 year olds use their parents passcode. 

  2. Ed Papazian from Media Dynamics Inc, July 17, 2017 at 1:07 p.m.

    As you note, Sean, Netflix in the U.S. has its primary appeal to middle aged adults who have the income to support subscribing to this service in part as a form of "conspicuous consumption" and, in part, because they don't like many of the shows aired in primetime by the broadcast TV networks. It should be said that Netflix subscribers are, if anything, above average cable viewers, because basic cable does offer them the variety of content options that are not available via broadcast TV with its same old, same old, approach to programming. As for the millennials, these are and have always been the lightest viewers among adults and the most fickle when it comes to hopping onto new fads or trends, then jumping off to try something newer and more "cutting edge". I suspect that Netflix will feel this lack of loyalty, especially among the lightest viewers---the 18-24s----or is already feeling it. Will oldsters step up to fill this vacuum? Perhaps. We shall see.

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