Netflix Saturation Nears, With No Dearth Of Original Content To Binge

Netflix subscriber growth continues to slow. In its Q4, 2021 earnings interview tonight, company executives said it’s “tough to pinpoint” why customer acquisition hasn’t recovered to pre-pandemic levels. But the reality is that the streaming market has become saturated. This translates to more choice for consumers who are growing concerned with the aggregate costs of their streaming subscriptions – This is on the heels of Netflix’s price hike in North America last week. Fresh data from Forrester sheds some light on the competitive levers that Netflix has or can consider:

    1. Its bulk season drops
    2. Original Programming
    3. An ad-supported tier?

Consumers Prefer Bulk Season Drops Versus Episodic Releases.

On February 1, 2013, Netflix did something that had never been done before. It released all episodes of a brand new series entirely at once. House of Cards was delivered with the emerging binge-watching trend in mind. Nine years later, it’s still the de facto model for Netflix series releases – a model that’s still in vogue. According to the company’s Q4, 2021 letter to shareholders, Netflix series accounted for six out of the 10 most searched TV shows (globally) on Google.

Data from Forrester’s December 2021 Consumer Energy Index And Retail Pulse Survey reinforces consumer preference for the binge watch model: Fifty-five percent of US online adults who use a streaming service prefer it when an entire season of a TV show is released at once versus on a week-to-week basis. To get more context, we tapped Forrester’s ConsumerVoices Market Research Online Community (MROC) and asked about their streaming preferences. The most common factors that drive US adults to prefer bulk season drops are:

  • Convenience: The majority of respondents want to watch on their own terms versus the streaming company’s schedule. Some use weekends for dedicated watch time and others prefer to watch full seasons in one sitting.
  • Commitment: It takes watching a couple of episodes to determine if one wants to commit to a given show. We heard that it’s easy to forget when a new episode is released causing some respondents to not stick with the series.
  • Impatience: Some streamers admitted that they simply don’t want to wait a week to see what happens in the show they’re watching. Others are concerned about having to refresh their memories from the previous week.

On the other hand, those that prefer weekly episodic releases mentioned they like having something to look forward to week-to-week and it allows them time to process and discuss a given episode.

Original Programming Mitigates Subscription Cancellation.

While Amazon Prime Video followed a similar “all at once” model, other Netflix competitors including Disney+, Hulu, HBOMax, Apple TV+, and Paramount+ adopted a more traditional weekly episodic release schedule – a model that can stretch public interest and anticipation for a series while also blunting against cancellation churn. Fifty-one percent (46% male versus 54% female) of US online adults who use a streaming service cited the top reason they haven’t cancelled a streaming service is because they don’t want to miss out on its original content. One of the reasons why Netflix lowered it’s Q1, 2022 acquisition outlook is because its original content slate is back-end weighted in the quarter which means there’s less value to attract new subscribers in Q1.

Ads Are Tolerated—If Not Preferred—To Drive Costs Down.

A week before today’s Q4 earnings call, Netflix raised its prices. The accumulating cost of streaming subscriptions is on the minds of consumers: Forty-three percent of US online adults who use a streaming service are concerned with how much they’re paying for all of the streaming services they subscribe to. And while consumers are quick to say they hate advertising, they are apt to tolerate it for lower subscription fees: Forty-four percent (39% male versus 48% female) of US online adults who use a streaming service would rather their favorite streaming service have ads/commercial breaks so they can pay less for it.

Members of Forrester’s MROC told us that during commercial breaks, they’ll often mute the sound and do things (i.e. email, text, check social media, play games) on their mobile devices. As one person put it, “I hate ads, but I’d rather have two services with ads than one without them. So, if I have a choice, I choose having ads.”  That said, Netflix maintained in tonight’s earning’s interview that its has no plans to offer ads.

Cost, COVID, And Convenience Drives Movie Theater Aversion.

Forrester’s December 2021 Consumer Energy Index And Retail Pulse Survey also revealed a majority (54%) of US online adults who use a streaming service would prefer to watch movie premieres on a streaming service versus in a movie theater. Forrester’s ConsumerVoices Market Research Online Community (MROC) to us that going to the movies has become too expensive, especially for families; COVID is still a factor; they like being able to pause the movie for a bathroom break; and home theaters have come a long way – although several respondents said if it’s an action movie, they’d rather see it at a movie theater. Netflix noted in its earnings report that Red Notice and Don’t Look Up were the company’s biggest film releases.

I’d love to hear what you think. Tweet me your thoughts at @McProulx and let’s chat more about the data via a Forrester guidance session.

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