Lily Kholar's blog : Price Hikes for Streaming Off the Table? Research Suggests So
As the streaming environment continues to struggle in a saturated market, ad-supported subscriptions have become the major drive of both new subscription growth and income. However, reports that Netflix is considering a post-strike price hike for its ad-free subscription tier have still not been well received among the American public, at least if data from a study conducted by CivicScience has anything to say about it. Our expert top entertainment law firms los angeles, Brandon Blake of Blake & Wang P.A. crunches the numbers on this controversial plan.
Brandon Blake
Key Takeaways: A Price Hike Could Tank Subscription Numbers
According to the data gathered by CivicScience, including polls from 4,000 respondents, if Netflix were to raise prices on its ad-free tier, a significant portion of its user base would contemplate jettisoning their subscription option. Of respondents, 39% report they would cancel outright. However, 31% also suggested they would look at the ad-supported tier instead. Given that most of Netflix’s recent subscription movement has been on the ad-supported tier, Netflix itself may indeed be hoping to boost this newer entrant into their subscription stable through the move.
Netflix has been discussing a price-hike for several key markets, with North America, as always, being the first roll-out point. As we don’t yet have a dollar amount for the coming hike (or, in fact, a date, hinging on the resolution of current strike action as it does), discussions are speculative at best.
However, it’s tough to imagine a business environment where a 35% or 40% subscriber churn can yield a net positive, even if others choose to downgrade to the ad-supported model. While polls and surveys offer a limited view into the landscape- and inevitably attract bolder claims than we see play out in reality- this strong response suggests it may be time for Netflix, and other streamers, to tread lightly on hiking prices.
A Question of Tolerance
Whether or not we’ve officially reached the upper boundary of how many price ‘tweaks’ subscribers will tolerate as streamers try to maximize their balance sheets, we’re certainly pressing close to it. Currently, about 73 million of Netflix’s 238 million global subscribers come from North American shores, so we’re not talking small markets, either.
We’ve already seen a mass migration of sorts to ad-supported options across all streamers in recent months. Indeed, we’re ironically close to seeing the streaming market as a whole echo the older linear/broadcast model, where ad revenue became the bulk of income. And it's clearly what a lot of streamers are banking on, too, as there’s little chance of further subscription uptick on premium tiers in markets that have already reached saturation point. However, we cannot also ignore the impact of inflation on streaming subscriber numbers. Data suggests one-third of U.S. adults are already looking to reduce streaming spending, up from 28% in January. And the number of households carrying multiple streaming subscriptions is in a steady decline.
Nor can streamers rely on the ad-supported model entirely to offset these concerns. A quarter of ad-supported users, mostly in the 35-54 age bracket, are also reporting ‘price sensitivity’, or a reluctance to pay out more. Pair that with 29% of streaming users reporting a lack of interesting content to keep them hooked.
Sometimes aggressive price hikes and the launch of ad-supported tiers have been the flavor of 2023, but as always, there is a limit. If the streaming market is to fully establish itself, it seems all economic indicators are suggesting it is time to consider other ways to add value to consumers, instead of simply hoping to raise prices out of their budgetary woes. Every household budget, after all, has its limits.
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