The latest Netflix prediction is that the streaming service could lose as many as 4 million subscribers in 2020. Netflix has come under heightened pressure recently due to the increase in the number of new streaming services. The problem for Netflix is a lot of these new arrivals are priced far lower than Netflix. This has led to many suggesting these services will affect Netflix’s subscriber growth, leading to some being referred to as “Netflix killers.”
Netflix has not had too many issues in either attracting or maintaining subscribers in the past. While the service did see a slight decline in subscriber growth in the second quarter of 2019, it returned to normal in the third quarter. In September, Netflix confirmed it had close to 160 million subscribers worldwide. 60 million of those subscribers are based in the U.S., and it is that number that is now predicted to drop by 4 million next year.
The latest subscriber drop prediction comes from Needham & Company’s Laura Martin. In explaining the reasoning to Bloomberg, Martin says Netflix’s main problem is its inability to compete on price with newer services, such as Disney+ and Apple TV+. For example, Disney currently charges $6.99 per month while Apple TV is even cheaper, priced at $4.99 per month. This is in comparison to Netflix’s pricing which starts at $8.99 with restrictions on the number of streams and the resolution. Some Netflix subscribers currently pay up to $15.99 per month.
Martin suggests Netflix can avoid the drop in subscriber numbers if the company introduces a cheaper package, one that’s ideally priced between $5 and $7 to directly compete with Disney, Apple TV, and the upcoming NBC Peacock service. NBC has yet to confirm pricing for Peacock, but it is also expected to cost less than Netflix’s Basic plan. This suggestion by Martin is not that Netflix simply drops the price and loses money but instead offers an ad-supported tier as a plan option. This dual ad-free and ad-supported strategy will let Netflix maintain its market value but also compete in the new - and lower - price bracket.
The problem Netflix faces with ads is that no one seems to want ads on Netflix. This appears to even include Netflix itself. Rumors of a “Netflix with ads” have surfaced routinely in the past causing Netflix to routinely shut the rumors down again by insisting there are no plans to add commercials. Arguably, Netflix will benefit from the revenue generated by ads, but it does seem to understand ads would be a hard sell to its current subscribers. A 2019 study in the UK found Netflix could potentially lose as much as 57% of its subscribers if commercials were added to the service, making it a risky choice.
More: Why Netflix Dominate Golden Globes Nominations
Source: Bloomberg
