Is a Netflix-Like Meltdown Next for This Streaming Service? (Answer Inside)

Apr 30, 2022

A couple of weeks ago, Netflix Inc. (NFLX) posted negative subscriber growth for the first time in more than a decade, which led to the stock crashing more than 40% over the next few days.

For the year, the stock price is down roughly 70%.

To top it off, Bill Ackman, one of the company’s largest shareholders, jumped ship.

He sold all of his fund’s shares (a $1.1 billion investment) in response to the company’s plans to adjust its business model moving forward… a tidy little $400 million loss.

Netflix’s outlook is certainly up in the air.

But I’m not here to recap its woes.

I’m here to tell you that I’m beginning see patterns in LikeFolio’s consumer insights data that may prove Netflix isn’t alone in its struggles.

The chart above captures the number of people over time who are complaining about having too many subscriptions to maintain.

As this measure moves higher, we can expect more and more customers to begin questioning, or even canceling, some of their subscription services.

The question then becomes: Which company will be the first to be cut from consumers’ credit card statements?

Is Disney+ The Next Streaming Domino to Fall?

While Netflix and Disney (DIS) have major differences (Disney is FAR more diversified), the similarities between Netflix and the Disney+ streaming service are noteworthy.

Prior to NFLX’s huge fall, LikeFolio data was beginning to show some signs that user cancellations were becoming a problem for Netflix:

Much of this cancellation volume was a reaction to the company’s recent price hikes, a disappointing content library, and some popular “cancel Netflix” memes being shared by frustrated millennials.

When I compare the chart above to cancellation mentions for Disney+, I see a similar pattern of concern for Disney:

Amazingly similar, isn’t it?

But when we dig into the qualitative reasons behind the cancellation spike for Disney+, we see very different drivers.

For Netflix, it is primarily a pricing and content issue: The value proposition of the Netflix service itself has dropped.

On the other hand, consumer reaction to the fight between Florida’s Ron DeSantis and Disney over recently passed education legislation has meant the reasons for cancellation of Disney+ are mostly political. This is a critical point.

Historically, LikeFolio has seen limited long-term impact from political boycotts or cancellation surges like the one we are seeing in Disney+.

Bottom line: User cancellations are a real and growing problem for both Netflix and Disney+ at the moment, but I would expect Netflix’s problems to last far longer.

All Disney has to do is lie low for a little while and lean into its incredibly diverse portfolio of revenue streams.

Netflix, however, could be in search of a better product and pricing model for some time to come.

Andy Swan
Founder, LikeFolio