Blog Post

Netflix subscribers threaten to quit, but will they really?

Internet message boards, blog comments and various social networks have been swamped with the gnashing of teeth and displeasure of Netflix subscribers outraged by the company’s recent update to its subscription pricing plans. The feeling one gets is that the company is on the verge of a mass exodus of subscribers due to the overwhelmingly negative response of commentary around the web.

This isn’t the first run-in that Netflix has had with consumer dissatisfaction lately. Actually, the latest outrage follows what has been a slow burn of negative commentary from a vocal minority of users for quite a long time. The first indications of unhappiness with Netflix surfaced when it raised rates for its combined DVD and streaming service to $9.99, while offering a cheaper streaming-only plan. Then the company removed its DVD queue from connected devices, a move which brought thousands of comments to its blog. Later, commenters complained when the company redesigned its website to make it easier for streaming.

But now more than ever, critics are showing up en masse to voice their displeasure over changes to its pricing plans. And this time things seem different: that slow burn has finally exploded a powder keg of subscriber discontent. To channel Network‘s Howard Beale, Netflix subscribers are “mad as hell, and they’re not going to take this anymore!” Or will they?

There have been numerous informal and unscientific polls around the Internet suggesting that anywhere from 30 to 40 percent of subscribers could reduce their DVD and streaming plans to one or the other, or that they could quit the Netflix service altogether. Meanwhile, BTIG analyst Richard Greenfield reports that after Netflix emailed subscribers of the pricing change, customer service lines have been ringing off the hook, to the point where some users can’t actually get through to voice their concerns or learn more about their pricing options.

But how many of those subscribers will actually quit? Despite months of creeping complaints from legacy DVD users that the company’s focus on a weak library of streaming content meant they were being ignored by comparison, Netflix’s subscriber growth has been at an all-time high and churn has been at an all-time low.

In the first quarter, churn was at 2.8 percent, much lower than its typical 3.5 percent to 4 percent that Netflix has reported over the last several years. When Netflix reports second-quarter earnings on July 25, analysts will be looking closely at its churn in comparison not only to the 2.8 percent from the first quarter but the 4 percent that it reported in the second quarter 2010. But since Netflix’s price change wasn’t announced until July and doesn’t fully go into effect until September, we won’t know the full impact it’s had on the company’s financials until it states third-quarter numbers in October.

The more likely scenario is not that Netflix users quit, but that they downgrade to one plan or another. (Before they quit, they should check out this test from FeedFliks to see how much usage they get out of each service.) But let’s say that a bunch of fed-up Netflix subscribers do leave. Chances are, they signed up for Netflix as DVD users but don’t want to stick around because the streaming service doesn’t have enough content for them.

While there are plenty of Netflix DVD users still around, the subscribers that it’s attracting are signing up primarily for its streaming service. That’s one reason that average revenue per user continues to decline, as it on-boards subscribers with its $7.99 subscription streaming-only plan. And, frankly, those are the subscribers that it wants anyway, rather than the expensive DVD-by-mail users that have been loudly complaining. All of which is to say, even if a bunch of DVD-by-mail subscribers do leave, Netflix will be happy to replace them with the more profitable streaming subscribers.

37 Responses to “Netflix subscribers threaten to quit, but will they really?”

  1. CopperAngel

    I am definitely downgrading service. I can always go to one of the 50 RedBox locations that are near me and get a DVD when I want one!

  2. E Palmer

    Netflix is obviously seperating the businesses so it can sell off the DVD only model. That is why is restructured with a new separate division to handle the DVD side.

  3. Chuck123

    I went on Feedfliks to analyze my usage, 108 movies in my queue, only 6 available for streaming. The streaming choice has always sucked and it won’t get better. It’s a painful experience to go over the list of movies available. Those dropping the mail in DVD are up for a very poor experience at high cost. For the same price, I will rent 4 DVDs a week with Redbox and drink 2 lattes in honor of Netflix’s CEO.

  4. I cancelled the disc portion of my membership and went streaming long ago because their Blu-ray selection is balls.

    Happy with Netflix for streaming and Blockbuster/Redbox for Blu’s.

  5. McBeese

    I cancelled my account. Yes, I was annoyed by the price increase but I’ve also been disappointed with the content. Netflix was good for catching up on stuff I missed the first time around (Dexter, Stargate Atlantis,…), but once you’ve ‘caught up’ there is very little new stuff to view. I find myself back to iTunes for recent release movie rentals. I’ll probably check in on Netlfix next summer to see if it’s worth subscribing again.

  6. I will be canceling my subscription next month before the price hike goes into effect on September 1st.

    I’m a casual user who streams occasionally and gets several DVDs a month. $17 a month (after taxes) is just too much to have DVD mailer AND streaming privileges!

  7. Mr. Blonde

    I really did quit, today. I can afford Netflix’s new rates, however, I will not stand for a 60% increase in prices for a service of any kind.

  8. Michael

    Like “CDaHumanist” said, put your money where your mouth is. Everyone needs to take a stand and not just downgrade! Thats what they want you to do!!! Cancel and let your voice be heard. If not nothing will ever change!

  9. I’m NOT going to cancel my account–not over this non-increase anyway; I’ve never wanted DVDs. If you want both, then you’re going to have to pay a fair price for each service (because each one incurs different types of costs for Netflix). The free ride is over–welcome to the real world… and once Hollywood (aka the “studios”) gets through with its contract negotiations, expect to have to pay double or triple what you have to now (which *IS* when I’ll cancel–Hollywood already gets more than they deserve).

  10. Darwin

    I went streaming only which is actually what they want people to do. I can supplement dvd and blu ray from Redbox etc. Netflix blu-ray selection sucks. But they can’t get around charging substantially more out of the blue without giving you anything more. Reminds me of Blockbuster which is not a good thing.

  11. anonGiga

    I have not cancelled my account nor do I have any plans to cancel or downgrade.

    I am someone who is glad Netflix raised their prices as it will provide them with more money with which to purchase better streaming content.

  12. I canceled my account this morning. Their online service just doesn’t have enough new movies to make it worth it. I’ll just use Pay-Per-View movies instead.

  13. Yes, I’m really quitting. No doubt about it..won’t pay that amount! They built their company on being affordable, and I’m sorry but I already have a cable bill, I don’t need another bill to pay. At $10 it was okay, but at $16, I’ll pass. I’d save money just going to the movie store at that rate.

  14. BayAreaGirl

    I currently get one DVD at a time and the streaming content. However, the price increase is going to make me change or cancel my plan. I feel like either route I take (the DVD rentals OR the streaming content)if I stay with Netflix will leave me feeling a bit shortchanged. The streaming content is a bit dated, the search features not user-friendly, and my Internet connection apparently isn’t fast enough to prevent movies having to reload mid way through. The DVD rentals take a couple days to receive and sometimes are scratched. The 60% hike is pretty extreme and I’m definitely considering other options.

  15. Frank Patterson

    I just rejoined Blockbuster’s mail service out of spite. I have been a Netflix customer since 2004. This is the usual disloyalty toward customers that has, unfortunately, become the norm with large businesses.

  16. Well, I quit earlier today. I was previously subscribing to the streaming only plan, but the content selection was so poor that I just decided to give up. I won’t sign up again unless I can get new releases streaming for around $20/month. Until then, it’s cable movie channels and Redbox for me.

  17. Twin_Flyer

    I will downgrade to the streaming only plan from the streaming + 1 dvd at a time. I am hoping they add a LOT more titles to the streaming library after Sept. 1st. If not, then I’ll reconsider dropping the entire service.

  18. Sunshine1970

    I’m downgrading. Right now I get 2 dvd’s and unlimited for roughly $15. I will be moving to the $15.98 choice 1 DVD & unlimited. I was thinking about going this route anyway. I’m just annoyed the price went up that much.