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3 reasons why Netflix can’t win the ‘streaming wars,’ analyst says

February 8, 2022, 12:21 AM UTC

Netflix is no longer the online video titan it once was and, based on its current trajectory, is likely to lose the so-called streaming wars.

That’s according to a Needham & Company analyst report published on Monday that’s skeptical of the company’s chances to fend off rivals like Disney, Apple, Peacock, and Paramount. The analyst note, based on a survey of 504 U.S.-based Netflix subscribers, revealed the biggest challenges. 

In January, Netflix shares dropped nearly 20% after it reported weak guidance. The company said it expected to add 2.5 million customers in its first quarter, far short of the 5.9 million that analysts had projected. It also said that it only added 8.3 million subscribers in its most recent quarter instead of the 8.5 million it originally forecast for.

Netflix Co-CEO Reed Hastings acknowledged during an earnings call with analysts that “there’s more competition than there’s ever been.” However, he said that the streaming video market size is “very large,” and that the company’s execution is steady and getting better.”

Netflix did not immediately respond to Fortune for comment.

Here’s some of the problems that Netflix must overcome, according to the Needham analysts.

Netflix subscribers are increasingly unhappy

Netflix subscribers aren’t as enthusiastic about the service. Thirty-one percent of respondents said they were “less happy with Netflix content than 1 year ago,” the survey found, in what the Needham analysts said is a sign that many may cancel their Netflix subscriptions this year.

The authors said that consumers may be more willing to subscribe to other video services because those have more content that they haven’t already watched on Netflix during the COVID-19 pandemic. Other streaming services also offer lower-tier subscription plans that are often cheaper than Netflix, and that could be more attractive to the company’s unhappy customers.

Netflix’s pricing strategy is flawed

Netflix’s pricing model represents a “competitive disadvantage” because each of its subscription tiers includes the same library of shows, the report said. Instead, the company’s tiers are based on the number of devices that people use to access the service, and other technical features.

Several rival streaming services, however, have free and lower-tier subscription plans that offer viewers limited access to some content or require customers to watch ads in exchange for paying less. This pricing strategy has proven successful for rivals, the authors claim, citing Discovery+, which disclosed “that it’s ad-lite tier generates more revenue each month than its ad-free tier.”

Price hikes turn off subscribers 

The report said that 41% of survey respondents said they are “more likely to churn in 2022” because of Netflix’s recent decision to raise its monthly subscription prices. Netflix announced the price hikes of $1 to $2 more per month in January.

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