With nearly 222 million subscribers, Netflix is the world’s biggest streaming service. But analysts are sounding alarm bells as growth appears to be slowing. How will they tackle the next chapter of their story?
The platform’s two biggest competitors, Amazon Prime Video and Hulu, are the two most prolific streaming services for offering add-ons. Add-ons are additional subscriptions or channels that sit on top of your normal subscription. There are pros and cons, mainly revolving around how much you want to spend and the quality of content.
Add-ons can open up a whole new world of new originals, exclusives, and popular titles that you want to get your hands on without having to sign up for multiple subscriptions for different services.
Either Netflix could be potentially losing millions every year, or their platform is so exclusive and unique there’s no need for other subscription add-ons to get in the way.
Related: What Premium Channels Can You Add On to a Hulu Subscription?
Why Netflix Should Get Add-on Channels
There are a couple of reasons why Netflix should get add-on channels. The first one is: more content.
Reason 1: More Content to Supplement High Price
The service can always be better. If Netflix wants to justify ever-increasing prices, it will need to raise the bar.
During the Q4 earnings call, Nidhi Gupta, Portfolio Manager, Fidelity Management & Research Company LLC, raised a very interesting and valid point. She said, “When I look at your steady price increases in the U.S., it doesn’t seem like you feel too constrained by where those competitors are priced… And I guess as long as your viewing share is multiples of any other streaming service in the U.S., should we think about your price relative to cable actually as we think about your runway — is that really the comparison we should be thinking about as opposed to other streaming services?”
As growth decelerates, Netflix decided to raise its prices in the U.S. and Canada to keep the money flowing. And prices will only continue to creep up. On January 14, Netflix raised its prices on all new U.S. subscribers, with the standard plan going up to $15.49/month, the 4K plan up to $20/month, and the most basic plan is an extra $1.
The response from Netflix was in a typical diplomatic fashion. “Mostly, we’re listening to our members and sort of iteratively doing this walk where the metrics that we see in terms of engagement… are really our signal that we’ve done a good job at sort of creating this more value and it’s the right time to ask for a little bit more to keep that going… And so if we have incredible stories, movies that you can only see on Netflix, great TV shows, unscripted, now games coming, then that really — the value equation for any given member or members-to-be in a market is just are they getting good value for what they’re paying. As long as we do a good job there, we feel like we’re fulfilling that need,” said Gregory Peters, COO & Chief Product Officer, Netflix Inc.
Later on in the call, Nidhi asks, “How might you actually evolve your content strategy or your pricing strategy to get the next 200 million subscribers?”
Co-CEO Reed Hastings responded, “The back third is definitely going to be harder than the first 2/3 in terms of appealing more unscripted, more superhero, and we’re working on all of that. Because we don’t have sports and news, you might say, well, if we get to 80% or something of pay-TV, that’s a good accomplishment. But also, streaming TV is such a better experience than the old linear TV. In some ways, we think to ourselves we should be higher than pay-TV, a combination of lower pricing and a better experience.”
Hastings added, “So definitely frustrating for us, the current slower growth… It’s possible that we’ll get there, but slower than we thought, smart TV adoption, complexity, those kinds of things. But we’re still focused on the original thesis of if we become incredibly compelling, everyone’s going to want to be a Netflix member.”
We get it; Netflix prioritizes the quality of its content. But what if there could be more? The service could especially benefit from sports and news content.
Reason 2: Raise the Bar in Streaming Wars
It’s really rare that a subscriber would just have Netflix to watch. But those who do may be interested in adding an HBO or STARZ to the mix. STARZ has a lot of outdated titles on Netflix, so it would be nice to see more such as the 2021 comedy-drama “Blindspotting.” And since Cinemax’s content left the platform years and years ago, that could attract a group of customers as well.
It’s also clear that bundles are all the rage. Just look at Disney+. The Disney bundle gives subscribers access to Disney+, Hulu, and ESPN+ and costs $13.99/month, which saves subscribers $8 every month. The trio combined gives viewers access to thousands upon thousands of titles. If you own one Disney platform, it makes sense to add the others. Essentially, Disney is charging less for three services combined than Netflix does for its entire platform of 15,000+ titles.
And now that Hulu Live TV raised its prices by $5, the bundle is now automatic and subscribers get a $15 value.
Although many competitors have fewer subscribers than Netflix, they will eventually catch up if the company continues having this stall in growth. And as more services bundle (or even merge like WarnerMedia-Discovery), Netflix will be left scrambling for leftovers.
Reason 3: Wider Audience Than Competitors
Also, the number of devices that Netflix is compatible with far surpasses Hulu and Amazon. This means more users; thus, add-ons could be a profitable bonus to the company.
Eventually, the platform could be the only major service that refuses to bundle with other competitors. Maybe they’re too good for that sort of thing, and maybe they’re not. That’s up for the audience to decide.
Add-on channels make sense for Netflix, plain and simple. It’s a no-brainer to allow content creators to make more money and give viewers more choice. Plus, given Netflix’s main competitor’s push in this sector, we think it’s in their best interest to catch up and to do it fast.
Why Netflix Shouldn’t Get Add-ons Channels
Netflix doesn’t really need add-ons. Mostly because it pretty much has it handled on the content front. With this upcoming year’s content spend, especially international titles, this may be enough for subscribers to keep subscribing.
Reason 1: Too Complicated & Time Consuming
It’s possible that add-ons may make streaming life complicated. The whole concept of streaming is to save money, and if you have to add multiple services, you could end up spending more than you were spending on cable.
Netflix is super simple compared to most, so adding multiple subscriptions make things potentially more confusing. Plus, too many choices can be overwhelming to some.
There are also many users who don’t have the time or money for a bunch of subscriptions they don’t need. So light users will need to weigh the benefits of a bundle or add-on before committing to a larger bill.
Reason 2: Lose Customer Connection & Value
According to Binary Stream, “Partnerships may cause you to lose connection with your subscribers and control over the end-to-end customer experience. You won’t be able to harvest data on their behaviors or quickly respond to feedback.” Netflix has been known to be pretty good with its customer service, however, partnering with other services may take this away.
They also add, “Customers may choose not to renew their subscriptions after the initial discount wears off. Many bundles charge a reduced price for new subscribers for a set amount of time, if this is poorly managed, you can increase your churn metrics.” Netflix has an okay return and churn metric as of right now, so add-ons may only hurt them in the long run.
As of right now, Netflix has announced no plans for add-ons to be added to Netflix. Its priority right now is more and better content, mastering gaming, and continuing to infiltrate the international space.
Netflix
Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.