Netflix subscribers still angry, still unlikely to quit

angry man with sign

How far have Netflix’s opinion ratings fallen with the general public? In the few weeks since it announced a change in its pricing structure that could lead some users to pay as much as 60 percent more, its favorability with consumers has fallen dramatically, putting it roughly in line with Blockbuster. But even though Netflix subscribers continue to be unhappy with the way the company handled the change, they’re still unlikely to quit the service altogether.

According to YouGov BrandIndex, which measures the consumer sentiment of various brands through daily surveys, Netflix has fallen from top of the pack among video services to among the bottom. The polling firm’s BrandIndex Buzz score ranges from 100 to -100, based on how favorably consumers respond to surveys about the brand.

Just two weeks ago, Netflix strongly led Redbox, DirecTV and Blockbuster among video brands surveyed, with a 39.1 buzz score the before it made its announcement about the price change. Afterward, it dropped as low as -14.1 on July 18, before rebounding to place it in a virtual tie with Blockbuster. (This is especially interesting when you consider that Blockbuster attempted to take advantage of Netflix subscriber unhappiness with a special deal on its DVD-by-mail offering.)

Meanwhile, Morgan Stanley has surveyed Netflix subscribers to see how the price change will effect their plans to use the service in the future. And the results of those surveys aren’t entirely encouraging. The firm reports that about half of those surveyed (49.5 percent) fell into bucket of users that belong to the $9.99 unlimited streaming and one-DVD out plan, which will be most affected by the pricing change. Those users will either be forced to downgrade to a $7.99 streaming only or one-DVD plan, or pay $15.98 for both. So which will they choose?

Survey results indicate that about 15.5 percent of those users will migrate to the higher-priced hybrid plan, while 31.7 percent will go streaming-only and 13.2 percent will go DVD-only. But more than a quarter of users — 26.4 percent — said they would cancel their subscription altogether. According to Morgan Stanley, that would imply a 22 percent decrease in domestic subscription revenue and a 2 percent decrease in domestic average revenue per user.

But Morgan Stanley thinks the survey overstates the number of people that will actually unsubscribe from the service. In fact, the company concludes that the suggested subscriber churn of 25 percent across all hybrid plans was too high, and due to emotional response when taking the survey, which was taken a few days after the price increase was announced. Since then, Morgan Stanley notes that ad hoc polls have shown consistently lower churn results as users process the news.

At the same time, all the analysis of pricing and subscriber churn overlooks the positive margin effect that they move could have. While Netflix could see some decline in subscriber revenue, separating out the business units has the positive effect of forcing subscribers to make a choice between DVDs and streaming. Once they’ve done so, the Morgan Stanley notes that Netflix will be able to either “push customers in the direction of highest usage or appropriately monetize subs that use both services.”

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