According to a 2018/2019 survey
of approximately 2,000 consumers by Deloitte’s Technology, Media, and
Telecommunications practice, 69 percent of households subscribed to a streaming
service in 2018 and the average number of streaming subscriptions per households
was three. But, while consumers enjoyed
customizing their entertainment experiences, 47 percent expressed frustration of
the growing number of subscriptions and services required to watch what they
want.
With the launch of several
high-profile direct-to-consumer streaming services (like Disney+, HBO Max,
Apple TV, NBC Universal) in late 2019-early 2020, the market will be getting
even more crowded. What will that do to
consumers’ willingness to pay (utility) and the pricing power of legacy
streamer, Netflix? We may be getting a
glimpse of that now.
In the past, Netflix could increase
the price of its domestic monthly subscription services and not experience any slowdown
in subscriber growth. For example, Netflix
increased the prices of its standard and premium services in 4Q2015 and 4Q2017. During those quarters, the net subscription
additions were 1.56 million and 1.47 million, respectively. Netflix’s latest price increases in 2Q2019,
however, resulted in its FIRST negative change in U.S. subscriptions (a decline
of 123,000). With highly-valued original
and licensed content, Netflix was a must-have, an add-on to Pay-Tv or other
streaming services like Hulu and Amazon Prime.
With the announced introduction of new services by legacy content owners,
households may see Netflix less as a complement, and more as a substitute. At higher price points, Netflix’s demand becomes
more elastic and puts domestic revenue growth a bit more at risk.
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