One third of Netflix subscribers would consider switching to a less expensive ad-supported service tier, according to a new report from research firm TDG. As the streaming video market changes, the TDG researchers see such a tier as an appropriate competitive move from Netflix
While Netflix has clearly dominated its market and has continued to grow its subscriber base, competition from emerging offerings such as HBO Max and Disney+ threaten that dominance. A key concern is that some of these services will be offering content, such as Disney movies and Warner-developed content, that had formerly been available on Netflix.
“Netflix’s response to its thinning third-party library is to spend more on originals, which it’s gambling will keep subscribers from jumping ship,” said Michael Greeson, TDG president and Screen Engine/ASI senior vice president, in a prepared statement. “But with half or more of its most-viewed shows being owned by three studios, each of which is launching their own DTC services, how long can you convince 55+ million US consumers that your service is worth paying a premium price, especially compared with Hulu (offers an ad-based option), Amazon Prime Video (free with Prime), and Disney+ (coming in [at] $6.99/month)?”
TDG’s research from late 2018 found that Netflix’s most recent price increase strained the limit of the service’s value, even before popular third-party shows are pulled from the lineup. When this happens, short-term domestic price increases will be difficult if not impossible without deleterious results.
While Netflix has long enjoyed dominance in its market space, that has produced a bit of over-confidence and an embedded resistance to change, according to Greeson. “But the stage is shifting,” says Greeson, “and if, like Blockbuster, Netflix fails to evolve in a timely fashion, the company may see its domestic fortunes reversed.”
On the other hand, Netflix could bend a bit and launch a less expensive ad-subsidized tier, something that Greeson predicts will happen in the next 18 months.