Netflix Loses 8% of Consumers with $1 Price Increase: Study

Research firm The Diffusion Group conducted user survey just before the streaming service upped its monthly subscriber cost
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If Netflix increases its monthly subscription price by $1, 8% of surveyed broadband users told OTT research company The Diffusion Group (TDG) that they’d quit the streaming service.

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Another 8% said they’d downgrade to lower service tier.

This notable information came from a survey of 1,940 adult U.S. broadband users conducted by TDG in December, about a month before Netflix announced actual across-the-board price increases of $1 - $2 a month.

Related: Netflix Raises Prices as Consumer Subscription Spending on OTT Tightens

The subsequent TDG report, “Quantum Viewing Behavior,” didn’t indicate how many of the 1,940 polled subscribe to Netflix.

Earlier this week, Netflix announced that it was upping the monthly price of its base one-stream, standard-definition package from $7.99 to $8.99; the $11.99 two-stream HD package is going up to $13.99 a month; and four-stream 4K/HDR high-end tier, formerly $13.99, is spiking to $15.99.

While it had foresight to see Netflix’s price increase coming, and poll consumers on it, TDG did not as its sample what a $2-a-month hike might convince them to do. However, TDG said that a $3 rise caused 16% of its polling sample to say it would quit Netflix; another 22% said they’d downgrade service with a $3 monthly spike. Similarly, a $5-a-month increase would disrupt 47% of the base, with 22% heading for the exits.

Netflix has just over 58 million users in the U.S. and will report its fourth quarter earnings Thursday. Investors lauded the streaming service with a 6.5% stock price increase in the immediate aftermath of the announcement on Tuesday. However, executives in the streaming industry have noted that consumers might be reaching a limit in terms of how many monthly video streaming bills they can pay. 

"While TDG believes that Netflix will endure any short-term backlash from these increases, it is undoubtedly reaching a level of price resistance across all tiers," said Michael Greeson, president of TDG, in a statement. "At an average increase of $3 per month, 33% of Standard tier subscribers are likely (though not certain) to downgrade to a less expensive plan and 10% are likely to cancel the service altogether, compared with 28% and 6% of Premium tier subscribers, respectively. These variances are not insignificant."”

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