Has Netflix Reached a Saturation Point Among US Users?

As temperatures have finally plummeted, streaming video service Netflix has been feeling the heat. While the company boasted an additional 880,000 U.S. based subscriptions in the third quarter, the number fell well short of the company’s forecasted 1,500,000 new U.S. users. The disparate numbers left analysts and investors feeling uneasy. Netflix stock slipped as much as 15% following the announcement before finishing the day 2.4% down.

Netflix for it’s part, came out with a rather peculiar outlook on the issue. Netflix executives blamed the October 1st deadline for new chip-based technology in customers credit and debit cards for the shortfall. Citing “involuntary churn” (existing customers who neglected to update their Netflix accounts with the new account numbers associated with their chip-based cards) Netflix executives felt confident they’d be able to overcome the shortcoming in new members.

Data recently collected from the Technology Adoption Survey out of Georgetown University’s Institute for Consumer Research offers up a different, perhaps more alarming, reason for Netflix’s lack of new subscriptions. Month-over-month consumer responses demonstrate a likely saturation of the U.S. market for Netflix users:

NetflixNew1

Even more worrisome for Netflix is the stagnant growth they’ve seen for the past seven months in users (as a percentage of the US population):

NetflixExisting1

To be clear, the numbers above represent the portion of the US population that our data indicates has used Netflix over the last 6 months. Many are likely using Netflix without subscribing themselves – a tactic Netflix CEO Reed Hastings isn’t overly concerned about.

It’s fairly clear Netflix understands this likelihood given their global expansion over the past year, but they aren’t willing to acknowledge it just yet. Shifting blame to credit card technology advances and absent minded customers, Netflix’s reasoning leaves many wondering “…really?”

Catherine Guarnieri

Catherine is a first year MBA at the Georgetown McDonough School of Business. She graduated from the University of Notre Dame with a degree in American Studies. Prior to Georgetown she worked as an advertising executive, focused on delivering data-driven campaigns for a variety of clients across the health, eCommerce and  entertainment sectors.  She is interested in marketing  and the complex effects of emerging technology on brand experience.  

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