Analyst: Netflix Needs Lower-Price Tier to Avoid Losing 4 Million Domestic Subs in 2020

For years some Wall Street analysts have suggested Netflix offer an ad-supported platform, including running spots similar to what Hulu and Disney+ do. The streaming SVOD behemoth has steadfastly refused to do so.

With the domestic SVOD market near saturation and new entrants Apple TV+ and Disney+ soon to be joined by NBCUniversal’s Peacock and HBO Max, Wall Street again suggests Netflix revisit AVOD.

“Customers are more price-sensitive than previously thought, and competitors like Disney+ are already undercutting Netflix’s prices,” Neil Macker, analyst with Morningstar, wrote in a recent report, as reported by CNBC. “This price differential will cause lower subscriber growth than we had previously expected.”

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Indeed, Netflix added 420,000 subs in the United States in the fourth quarter, ended Dec. 31, 2019 — down from a projected gain of 600,000 subs.

Laura Martin, analyst with Needham, contends Netflix could lose 4 million domestic subs in 2020 without a lower-priced subscription price.

“Netflix must add a second, lower-priced service to compete with Disney+, Apple+, Hulu, CBS All Access and Peacock, each of which have $5– to $7-per-month choices,” Martin said.

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Netflix’s least-expensive streaming price in the United States is $8.99, while a DVD-only rental subscription costs $7.99 ($9.99 for Blu-ray Disc).

The SVOD pioneer recently launched a $2.99 mobile-only streaming plan in India with promising results, according to chief product officer Gregory Peters, who added on the Q4 fiscal webcast that there is “a pretty good indicator that there might be other countries around the world where that kind of offering will work as well.”

Separately, Netflix reportedly is downsizing its marketing department by 15 employees following the hiring over the summer of former BBC Studios marketing executive Jackie Lee-Joe.

Media reports says Lee-Joe sought to streamline the department for operational efficiencies. Netflix, which employs more than 6,900 people worldwide, hasn’t officially commented on the report.

 

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