We will be conducting this analytical study on Netflix with an emphasis on its decline in total subscribers. This decline in subscribers is incredibly significant to Netflix’s business model as subscription accounts for more than 99% of its revenue stream.
To answer this question, we first leveraged existing data from sources such as Kaggle and Google Trends. Then, we designed an online questionnaire focused on understanding what factors are most imperative to people using streaming services, what segments of users and audiences are there, and what are their individual needs. We have also analyzed this first-hand data using Factor Analysis, Segmentation Analysis, and Regression Analysis. As a result, we have developed several recommendations and marketing mock-ups based on quantitative results and managerial usefulness.
Netflix, the company that spearheaded modern-day video streaming business models, is losing subscribers. Starting from Q4 of 2021, Netflix has been in a constant state of decline in total subscribers, which is its first subscriber loss in over a decade. We have identified four main reasons for the subscriber loss hitting Netflix right now: Competitors, Price, Movie Library, and Show Cancellation Strategies.
- With new entrants in the market, such as Disney+, HBM Max, Peacock, Paramount Plus, and Apple TV+, it has become increasingly difficult for Netflix to keep its title as the frontrunner when providing the same kind of offerings they had to consumers. Netflix has to up its game in order to stay competitive.
- Netflix subscription fees have become more expensive. The monthly price of the standard subscription has been increased six times since 2014, making Netflix the most expensive streaming service on the market. And it is still unknown how its new introduction of a “Basic with Ads” plan will be received by the market.
- It is suggested that Netflix’s movie library has shrunk by more than 40% in 2022, now that traditional entertainment titans are all branching into streaming themselves.
- Netflix evaluates a show’s performance by balancing viewership against the cost of the renewal process with heavy reliance on algorithms. This over-dependence on algorithms could cause failures since they might not capture everything and the data may be incomplete, which both lead to fallacious results.
To summarize our analysis and conclusion, we have come up with the following recommendations for Netflix to reverse its losing trend in total subscribers:
- Our segmentation analysis results as well as Netflix’s own past success in creating original content in these genres both showcase the benefits and potential success that could come with this implementation. We strongly believe that Netflix should consider this adoption as making more Netflix Original romantic or reality content would also further enrich Netflix’s movie library.
- Our segmentation analysis also indicated that user experience is a heavily prized aspect of video streaming for consumers. It is also suggested from web research that user interface and cross-device experience have positive impacts on willingness to continue subscriptions. Therefore, continuing to better UX should be another main area of focus for Netflix.
- With more than 99% of its revenue stream coming from subscriptions, this stream of subscriber loss has a huge impact on Netflix’s quarterly performance. Therefore, we believe that instead of fixating on subscription-based income, Netflix should venture into alternative income sources, such as movie production and the box office.
4. Improve its show cancellation rule and deepen the collaborations and conversations with showrunners and producers
- Netflix’s cancellation rule should not depend only on algorithms and the balance between costs and revenue. Instead, conducting regular social listening analyses and collaborating more closely with showrunners and producers would help Netflix create better shows that cater to the need of the market.
We asked respondents to rank the performance of each video streaming platform of each of these factors from one to five (worse performing to best performing). From the snake plot, we can see that Netflix performed the best among all factors, but is considered only third best when it comes to price. This calls for a desperate need for change in Netflix’s revenue model. Since while they heavily rely on subscrition fees, consumers are not satisfied with the amount they are paying and just might switch because of this.
