Netflix could lose 4 million U.S. subscribers in 2020 amid the proliferation of new streaming services that offer cheaper plans, this analyst says.
Netflix Inc. historically has been averse to advertisements, but the changing competitive landscape in streaming likely warrants a change in strategy, according to an analyst.
While the thought of ads on Netflix may spook fans of the service who have grown accustomed to binge-watching content uninterrupted, Martin’s scenario calls for an ad tier as just one option that Netflix subscribers could purchase, alongside the traditional ad-free tiers. Adding six to eight minutes of commercials per hour could allow the company to price this option at $5 to $7 a month, in line with cheaper offerings from Walt Disney Co. DIS, -0.08%, Apple Inc. AAPL, +0.
The analyst is skeptical that growth in the international subscriber base will be able to support Netflix’s stock if the U.S. subscriber pool shrinks, since U.S. customers are about three times more profitable, by her estimations. In addition, international growth “is increasingly coming from $3/month mobile only subs, so it takes four of these subs to offset revenue lost from a single U.S. sub.”
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