The majority of Netflix customers are unlikely to switch to a cheaper, ad-supported version of its service next year, according to the results of a new survey.
The survey, released earlier this month by Whip Media, found 72 percent of customers were either unlikely or very unlikely to switch to the lower-cost version.
Netflix’s current subscription tiers include a budget option with standard definition streaming at $10 a month, as well as a premium tier with ultra-high definition streaming and th3 ability to watch on four devices at one time for $20 a month.
The cost of Netflix’s packages is likely to blame for the company’s recent subscriber losses. Earlier this year, Netflix startled investors when it said it lost 200,000 more subscribers than it gained in the three-months period ending in March. Last month, that loss widened to over 970,000 subscribers, for a total loss of just under 1.2 million paying customers.
Executives at Netflix have largely put its financial woes on a trend of password sharing between paying and freeloading customers. The company recently started asking non-paying customers in some Latin American countries if they would be willing to subscribe to the service, while offering subscribers the option to pay an additional $3 a month if they want to share their passwords out of home.
Financial analysts and some customers say the problem is deeper than password sharing. Over the last few years, Netflix has lost several licensing agreements that saw popular titles like “Friends” and “The Office” pulled from the platform.
Some of those titles have resurfaced on other streaming services that are cheaper and have more features than Netflix. Friends, for example, moved to Warner Bros Discovery’s HBO Max, which costs $15 a month and includes some theatrical releases in ultra high-definition (UHD/4K). HBO Max also has a cheaper, ad-supported tier that costs $10 a month, with HBO content exempt from commercial interruptions.
Ad-supported tiers have helped upstart services like HBO Max, Comcast’s Peacock and Warner Bros Discovery’s Discovery Plus grow at a time when popular titles become spread out across streaming services and when consumers are becoming more choosy about what they sign up for.
Media companies also see ad-supported plans as a way to increase revenue while keeping customer acquisition costs low. The ad-supported streaming market is flush with capital as advertisers increasingly seek to reach consumers on platforms with millions of active users. Executives at Fox Corporation, which operates the streaming service Tubo, say revenue from its free, ad-supported service could eclipse that of its broadcast network in just a few years.
Earlier this year, Netflix executives affirmed they were looking to launch an ad-supported tier in order to tap into additional revenue while reversing some of its subscriber losses. While current Netflix customers are unlikely to switch, they’re probably not the customer Netflix is targeting with its budget option; instead, the company appears poised to win back customers who have left for cheaper services, or convince new customers who might be put off by Netflix’s expensive plans to sign up for a budget option.
“We’ve left a big customer segment off the table, which is people who say, hey, Netflix is too expensive for me and I don’t mind advertising,” Ted Sarandos, Netflix’s co-chief executive, said at a conference in June. “We’re adding an ad tier for folks who say, hey, I want a lower price, and I’ll watch ads.”
