Netflix to Feel Pain of Inflation-Led Consumer Pullback: EMarketer

Rising costs and economic uncertainty are behind a “reconsideration of streaming’s future,” said eMarketer Wednesday, saying services are under pressure to attract and retain customers while “inching toward profitability.” In 2019, 32% of U.S. video subscribers paid for three or more services; 58% do today, and those feeling a pinch from inflation “are likely to take a hard look at which services they will stick with.” The pressure will affect Netflix “acutely,” and the company’s “recent stumbles” open the door for competing services to win viewers, said analysts Paul Verna and Ross Benes. They cited a March CivicScience survey saying 45% of U.S. Netflix subscribers were “very likely” to cancel their subscription if it began charging a premium for account sharing, which the company said last month that it plans to do (see 2204200002). Netflix’s plan to add an ad-based tier will cause an exodus of some customers, said the analysts. EMarketer had forecast that Netflix will reach 658 million users worldwide this year, but it will scale back that number in Q3 because streamers “pay extra to avoid ads.” EMarketer expects Netflix’s ad tier to be discounted, leading competitors to also charge premiums for ad-free plans. The company predicts Netflix's monthly active viewers will rise to 750.2 million in 2025, with its share of the subscription VOD user base slipping from 35% in 2022 to 34.9% in three years.