Report: Netflix Saw 3.6 Million Cancelations, High Churn Tied to Price Increase
Following the announcement on Tuesday that Netflix had shed 200,000 subscribers worldwide in the first quarter of 2022, measurement and analytics company Antenna went deep into some of the numbers that led to the streaming giant’s first quarterly decline in over a decade.
Antenna found that the issue spurning Netflix’s losses wasn’t a slowdown in their ability to add new customers, but instead a substantial increase in the number of customers canceling their subscriptions. In the first quarter of this year, Netflix saw 2.8 million new customers sign up for service, a number that is on the upper end of what the company has seen over the past six quarters.
However, they were hurt by a whopping 3.6 million cancelations. That is 1 million more than the company saw in Q3 2021, the next closest quarter since the end of 2020. In fairness, the company reported that 700,000 of those were a result of shutting down the platform in Russia following the country’s invasion of Ukraine in February.
But even without the Russian losses, Q1 2022 would have been the largest subscriber cancelation total by 300,000 customers since Q4 2020.
Antenna also noted that the number of cancelations following the announcement of the company's latest price increase far surpassed those of the previous two rate hikes.
When Netflix announced that it was raising the price on all three of its subscription tiers by anywhere from $1 to $2 per month, the company saw an immediate rise to 3.1% of its userbase canceling in January and that total increased to 3.3% in March.
Following the company’s rate increases in January 2019 and October 2020, Netflix only saw active monthly churn at a 2.1-2.2% rate. The only other time that the company has experienced churn at the rate that it currently is was in September 2020 following the release of a controversial documentary on youth cheerleading called “Cuties.” During that time, churn got as high as 3.6%.
Following the release of their quarterly subscriber data, Netflix CEO Reed Hastings announced that after avoiding the option since the company’s inception, they were now actively exploring adding a lower-cost, ad-supported tier in hopes of attracting subscribers that might otherwise be turned off by the streamer’s high monthly cost.
While this announcement goes against the company’s long-established philosophy, it certainly makes sense with respect to their recent subscriber losses and the larger trends in the industry. Antenna notes that the percentage of ad-supported subscription video-on-demand (SVOD) services as part of the VOD marketplace has been climbing steadily in recent years.
With HBO Max launching an ad-supported tier last June and Disney+ planning to launch their own this fall, there is little doubt that those trends will continue. In 2020, ad-supported subscription plans claimed only 19% of the VOD market with ad-free making up 81%. Year-to-date in 2022, the ad-supported plans now make up more than 1/3 (35%) of the market, dropping the ad-free total to just 65%.
As more and more streaming services begin to hit their stride, it is no surprise that customers are more willing to turn away from Netflix. As the original streaming giant raises its prices, it is now easier than ever to justify canceling the service as HBO Max, Disney+, Apple TV+, and others remain cheaper and are creating compelling content at arguably a higher rate than Netflix.
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.