Netflix Problems Go Deeper Than Cost [with video]

The bottom line of a new report is that Netflix may lose almost a third of its current subscribers. Raising prices on entertainment when customers aren’t confident they can pay more essential bills can be a regrettable necessity, but it needs to be handled carefully. The same goes for dramatic changes in what a subscription includes. Netflix did both of these things abruptly and confusingly, and now Magid Advisors, a unit of research firm Frank N. Magid Associates, has analyzed what it and other factors may cost the company.

Netflix had 24.6 million subscribers before its pricing and service changes. In Magid’s consumer survey of subscribers, 9 percent of them say they’ll cancel rather than switch to a new plan, and an additional 14 percent say they’re “seriously considering” making the same decision. Add the 7 percent who say they’re cancelling for unrelated reasons, and Magid forecasts an unpleasant end to the year for Netflix.

Deeper problems lurk deep in Netflix’ troubled waters, however. “A major reason that many consumers are not happy with their Netflix service is due to the quality of the content selection in the streaming service”, said Mike Vorhaus, president of Magid Advisors. “Netflix will need to improve the breadth and timeliness of their streaming content to re-build major consumer momentum.”

That perception can only be made worse by Netflix’ loss of its deal with Starz, which came with popular streamed content like Sony and Disney movies. “Any loss of high-quality content is a big issue for Netflix because consumers are only somewhat satisfied with the current quality of selection,” Vorhaus said.

Meanwhile, Redbox is likely to pick up these displeased customers. Vorhaus said that 60 percent of Netflix subscribers also use Coinstar’s Redbox, and almost 30 percent of them think they’ll use Redbox more frequently in the future. Netflix is “offering a very price sensitive product,” he said, making it highly vulnerable to competition.

Adding video games to Qwikster, Netflix’ new division just for physical discs, won’t be of much help, Vorhaus said: “That audience is well served in retail and online already.”

Picture by flickr user Jeffrey (formatc1), used under Creative Commons license