Business

Netflix price hike amid slowing customer growth has many wondering: Are we streamed out?

The cost and convenience of streaming services like Netflix prompted millions to cut the cable TV cord in recent years. But with costs creeping higher and most households subscribing to more than one service, the explosive growth has slowed to a crawl, prompting some to wonder if the streaming party may be fizzling out.

Cost and variety of streaming-service bills can now rival those of cable

Netflix is still adding new customers, but far fewer than normal, which is partly why the company is raising its prices to try to squeeze more revenue out of its existing customers. (Gabby Jones/Bloomberg)

Like many Canadians subject to COVID-19 related restrictions, Suzan Lorenz has spent a lot of time watching online streaming services during the pandemic.

Where once she made do with just Netflix, with three kids under one roof, she finds herself subscribing to more services than she originally anticipated when she cut her cable cord several years ago.

"You end up paying for more and more and more things," she said in an interview. "It increases the spectrum of who you're paying to access."

Lorenz says she hasn't done the math on what she's paying for three streaming services every month or compared that to her old cable bill.

"I probably should," she said. "And I'll be shocked to realize that I should probably just pay the damn cable companies.

"We're all being had a little bit."

She's not the only one starting to think so.

After more than a decade of double-digit growth, subscription additions at Netflix are slowing, the company revealed in its quarterly earnings this week.

The fourth quarter is typically the best one of the year for the company that basically invented online streaming. While the company added more than 8 million new customers in the period, for the year as a whole new sign ups came in at their lowest level since 2015. And this year is now forecast to be even slower.

Slowing growth was too much for investors, who sold the company's shares heavily on Friday, pushing the price down by 20 per cent. For John Lynch, chief investment officer for Comerica Wealth Management, the reason for the sell-off is obvious: "If everybody already has Netflix, it's hard to improve subscriber growth." 

No wonder the company raised its prices in the U.S. and Canada again this week. Its costs for new content are going up — the company spent more than $17 billion on content acquisition in 2021, up from $11 billion the year before. In the past, the company could easily pay for those higher costs by signing up more paying customers. But if Netflix is running out of new customers, it has to start charging its existing ones more, which could cause many of them to leave. That vicious cycle is hard to get out of.

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Mature market

If free services and those based on user-generated content are included, there are hundreds of streaming services now available, Jon Giegengack with Hub Entertainment Research told CBC News in an interview. 

"People's adoption was already expanding at a pretty rapid rate, and then, the pandemic struck and kept everybody locked up in their homes with a lot of time to kill," he said.

Giegengack says the typical consumer now pays for video content from up to six different sources. As recently as 2018, it was half that.

"The number of sources per person has really risen dramatically since the pandemic started," he said.

While the industry was growing swiftly before the pandemic and throughout it, it is showing signs of maturing. 

"The reality is that the streaming market has become saturated" wrote Mike Proulx, vice-president of research for Forrester. "This translates to more choice for consumers, who are growing concerned with the aggregate costs of their streaming subscriptions."

For some consumers, keeping a lid on rising costs means being choosy about what to sign up for — and for how long. 

"Usually, we'll have one at a time," Andrew Hiscock of Mt. Pearl, N.L., said. "We have [Netflix] for a few months, watch what we're gonna watch, maybe use Crave for a couple of months, then go get Amazon Prime, that sort of thing. We're not usually paying for more than one at a time."

Others say despite higher prices, streaming is still a good value.

Torontonian Syed Raza uses a half dozen streaming services, and even at roughly $50 a month, he says it's still a better bang for his buck than cable.

"The biggest advantage of streaming is on-demand content, and that is something that always sucked about cable — that you had to watch something on the network's schedule, and you couldn't watch it as many times as you wanted," he told CBC News in an email. 

"The price for watching everything was never gonna be $10 a month forever. I don't know why consumers were gullible enough to believe that."

More than just costs

While costs are becoming a deterrent, consumers also now face the problem of being overwhelmed by the number of options and a complicated system to figure out how to watch them.

Taylor Sheridan, left, is the executive producer of the popular show Yellowstone, starring Kevin Costner, right. The show airs on the Paramount Network on traditional TV but not on its streaming service, Paramount+. Figuring out which shows are available on which streaming service is half the battle for today's viewers. (Mario Anzuoni/Reuters)

Giegengack says his favourite show, Yellowstone, is an excellent example of an increasingly common problem. The program about a ranching family is the most popular show on U.S. linear television right now, and the latest episodes air on the Paramount Network, which is owned by ViacomCBS.

"But Viacom sold the streaming rights to Peacock," he says, referring to the streaming service owned by Comcast, which owns NBCUniversal. 

So in the U.S., the current season airs on a CBS-affiliated channel while the back catalog is on an NBC-affiliated service, "and you can't watch it at all on Paramount+, which is Viacom's streaming service," he said.

To add to the confusion, all four seasons of the show air on Amazon Prime in Canada.

"Something has to happen to simplify this for people," he said.

Giegengack says making a hit show used to be the hard part, but making it available for consumers is now becoming just as tricky. And conversely, despite having access to more quality content than ever, the biggest problem facing consumers today is finding a way to use streaming services "in such a way that they're getting their money's worth out of them all," he said.

"That's hard to do when ... there's still only 24 hours a day to watch them."

ABOUT THE AUTHOR

Pete Evans

Senior Business Writer

Pete Evans is the senior business writer for CBCNews.ca. Prior to coming to the CBC, his work has appeared in the Globe & Mail, the Financial Post, the Toronto Star, and Canadian Business Magazine. Twitter: @p_evans Email: pete.evans@cbc.ca

With files from Reuters and the CBC's Meegan Read

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