Netflix is starting to chill. The granddaddy of streaming services, Netflix is bleeding consumers and market share. This slide illustrates a titanic shift in consumer viewing habits -- for better and worse.
An early adapter, Netflix is suddenly trying to lead in a new way: figuring out how to stop a slide that may lead to the same streaming oblivion fate of the short-lived CNN+ service, which imploded despite a gold-standard brand and ample resources.
The good news is that consumers have clear ideas about what they’re looking for, according to Harris Poll data. There is a path to renewed success.
Netflix lost 200,000 subscribers in the year’s first quarter, the first time it has lost customers in over a decade, but almost certainly not the last. The company told investors last month that it expected to lose another two million in the second quarter. Netflix is still king of this particular hill, with more than 220 million subscribers globally, but its competitors are closing: Amazon Prime has more than 200 million members, while Disney expects to crack 230 million by the end of 2024
Netflix is, to some extent, a victim of its own success. As the company wrote in its annual letter to shareholders, because “traditional entertainment companies realized streaming is the future, many new streaming services have also launched.” This virtual land grab has resulted in a busy ecosystem where Netflix once stood alone. According to our survey, 75% of respondents subscribe to a digital streaming service such as Netflix, Disney+ and HBO Max, as opposed to 52% of Americans who pay for cable or satellite TV.
What does the future look like? Streaming dominates among the three youngest generations polled: 72% of Gen-Zers subscribe to a broad-based platform like Netflix or Amazon Prime, while only 28% pay for cable (27% use channel-specific services). Seventy percent of millennials subscribe to on-demand platforms as opposed to 45% who pay for a channel-specific service (think HBO Max or NBC Peacock) and 40% who pay for cable. Two in three Gen-Xers subscribe to a streaming service.
The major streaming services are now in an innovation brawl. Netflix, for example, is testing a feature in Chile, Costa Rica, and Peru that would charge more for households that share their accounts with other households. Closer to home, the company told employees this month that it may debut an ad-supported service tier by year’s end. HBO Max launched such an option last June, and Disney is bringing its version online later this year.
Will such an approach work? Yes, according to our data—but with a proviso. Half of the Netflix users that we polled claim they would at least consider downgrading from a full subscription to a cheaper one that shows ads. That figure increases among Gen-Zers (60%) and millennials (58%).
Perhaps unsurprisingly, two in three Netflix subscribers making under $50,000 say they would find a cheaper, ad-based approach appealing. Meanwhile over half of millennials who do not subscribe to Netflix (54%) say that they would be at least somewhat more likely to subscribe to it if it were cheaper but ad-supported. The upshot is that, while this model would attract some new customers, its most significant effect may be to keep current customers from canceling their subscriptions.
Indeed, cost is the single largest factor Americans cited as to whether they subscribe to a specific platform or service, with 75% naming it as an issue (including 91% of baby boomers), followed by the amount of available content (55%), the ability to have an ad-free experience (50%) and access to a specific show or movie (subscribing to Disney+, for example, in order to watch “The Mandalorian”).
As streaming services focus their offerings, they should be aware of how generational tastes differ. We asked, for example, whether people would be likely to subscribe to a streaming service devoted to game or reality shows. While Americans as a whole are not enthusiastic about either idea, majorities of Gen-Zers and millennials report being likely to subscribe to services with game and reality shows.
That’s the future, too. Even something like CNN+ could come back: 58% of Americans, including strong majorities of Gen-Zers, millennials and Xers, said they are likely to subscribe to a current events-focused service. Interest dropped sharply among older Americans. Perhaps they prefer their cable news.
In any case, streaming companies can succeed if they understand their target audiences and the services they want.