Netflix stock has been on a rollercoaster -- and waning customer demand in the saturated video streaming market may be a concern, according to a new survey from The Motley Fool.
Like other over-the-top video streaming services over the past two years, Netflix experienced strong revenue growth driven by an uptick in subscriptions and simultaneous cost-cutting via paused production.
The result? Netflix (NASDAQ:NFLX) stock hit an all-time high in October 2021 after over a year and a half of steady gains.
Best tech stocks: Netflix is among our top technology stocks.
Then investors became spooked. In the fall, Netflix and its competitors reported sluggish subscriber growth compared to recent quarters. In April, Netflix revealed that it lost subscribers over the last quarter, leading the stock to lows not seen in five years.
Talk is now swirling of Netflix adding a cheaper, ad-supported subscription option as well as a crackdown on password sharing.
One reason subscription growth may be slowing is the fact that over half of Americans that are subscribed to a video streaming service think there are too many streaming options, according to a recent Motley Fool survey. A similar percentage believe it's getting too expensive to pay for all the content they want to watch.
On the other hand, over half of respondents reported spending more than $30 a month on streaming services, are subscribed to multiple services, and are watching more content than a year ago.
Best streaming stocks: Netflix made our list of top streaming stocks.
Read on to better understand how consumers are approaching streaming services and how that might impact companies that offer those services.
- There are too many streaming options and they're too expensive: 55% of Americans that have a video streaming service subscription believe there are too many streaming options. 53% say it's getting too expensive to pay for all the content they want to watch.
- Multiple subscriptions: 58% of Americans subscribed to video streaming services are subscribed to three or more platforms, and 62% also have a cable subscription.
- Spending habits: 55% of Americans that have video streaming service subscriptions spend more than $30 per month on those subscriptions. 20% spend more than they're willing to and 25% are spending less than they're willing to. 62% won't spend more than $15 per month on a single service.
- All about originals and exclusives: Video streaming service subscribers place the most value on original and exclusive content and the least value on live sports and news. 55% of those subscribed to video streaming services have paid extra to watch a movie otherwise only available in theaters.
- Still watching: 43% of video streaming service subscribers are watching more content than last year and 42% are watching the same amount of content.
55% of video streaming service subscribers believe there are too many options
Among Americans subscribed to a video streaming service, 55% think there are too many options.
This is likely a result of the proliferation of streaming services that has taken place over the last year.
There are now a number of platforms offering original content, exclusive libraries of classic shows and movies, and, for some, live programming.
[Streaming] is a space where the strongest have a distinct advantage in the form of large user bases and exclusive content.Jason Moser, senior analyst and lead advisor at The Motley Fool
As of Q4 2021, Netflix boasts the most subscribers with 221.8 million subscriptions active around the world.
|Service||Subscribers/viewers, Q4 2021|
|Amazon Prime||175 million|
|HBO Max||73.8 million|
|Apple TV+||20 million|
|YouTube TV||3 million+|
What lessons can investors draw from these numbers?
"While investors shouldn't view streaming as a zero-sum opportunity, it is a space where the strongest have a distinct advantage in the form of large user bases and exclusive content," says Moser. "Companies will need to constantly invest in content to stay at the head of the pack so homing in on the major players is a strategy that should pay off."
Over 50% of video streaming service subscribers think it's getting too expensive to pay for all the content they want
As more streaming services become available, more content is produced and existing content may move between services -- it's no surprise that 53% of video streaming service subscribers think it's getting too expensive to pay for all the content they want to watch.
Another effect of the fragmenting and expanding streaming landscape is consumers pining for a way to centralize and organize all their subscriptions.
57% of those who say there are too many services said they want the shows they watch to be available on one platform. 38% said they can't keep track of which service hosts the content they want to watch.
|Why do you feel there are too many video streaming services?||Percentage of respondents|
|I wish my shows were all on one platform.||57%|
|It's getting too expensive to pay for all the content I want to watch.||53%|
|I can't keep track of which streaming service hosts the content I want to watch.||38%|
58% of video streaming service subscribers are subscribed to three or more streaming services
Another sign of how saturated the streaming landscape has become is the fact that 58% of those who have a video streaming subscription are subscribed to three or more services.
Just 15% of respondents are subscribed to a single service, while 27% are subscribed to two services.
|How many video streaming services are you subscribed to?||Percentage of respondents|
|4 or more||34%|
The Nielsen survey resulted in similar findings. Fifty-nine percent of respondents said they are subscribed to three or more streaming services.
62% of Americans that are subscribed to a streaming service also have cable
Nearly two in three Americans that are subscribed to a streaming service are also subscribed to cable.
Having more streaming subscriptions doesn't necessarily trade off with having cable. In fact, those subscribed to one video streaming service are less likely to also be subscribed to cable compared to those with more streaming service subscriptions.
|Number of streaming service subscriptions||Percentage of respondents who have cable|
Most streaming subscribers aren't watching less content compared to a year ago
Even as the pandemic has waxed and waned over the past year, 44% of streaming subscribers report spending more time watching content compared to a year ago and 42% report spending the same amount of time watching content.
Just 14% say they spend less time watching content from streaming services compared to a year ago.
While 14% watching less content isn't worrisome on its own, it's a good reminder that entertainment is a large industry today that extends well beyond just streaming as more and more companies are vying for our attention.Jason Moser, senior analyst and lead advisor at The Motley Fool
In other words, the vast majority of American streaming subscribers are still finding value in the content provided by streaming services, even as some pre-pandemic normality begins to return.
|How much time do you spend watching content from video streaming services you are subscribed to compared to a year ago?||Percentage of respondents|
|I spend more time watching content from streaming services I am subscribed to compared to a year ago.||44%|
|I spend about the same amount of time watching content from streaming services I am subscribed to compared to a year ago.||42%|
|I spend less time watching content from streaming services I am subscribed to compared to a year ago.||14%|
Per Nielsen, consumers are spending 18% more time watching streaming content compared to last year.
Here's Moser's take on these numbers:
"Churn in streaming will exist as long as plans are easy to start and stop and because there are acquisition costs involved with capturing new users it makes sense to try to keep subscribers from leaving. Exclusive content is one way to do this but ultimately services want the largest subscriber base they can get in order to spread those growing content costs around."
"While 14% watching less content isn't worrisome on its own," he continues, " it's a good reminder that entertainment is a large industry today that extends well beyond just streaming as more and more companies are vying for our attention."
55% of Americans subscribed to a video streaming service spend more than $30 a month on streaming services
The majority of those subscribed to a video streaming service spend more than $30 a month on them.
Nearly one in five Americans subscribed to streaming services shell out over $60 a month to get their favorite shows and movies on demand.
Just 16% spend $15 or less. And 6% don't know how much they spend on streaming services every month.
Moreover, 59% of respondents are willing to spend at least $30 much per month on video streaming services, although fewer are willing to spend over $60 compared to the amount that actually do.
|Streaming cost||Percentage of respondents currently spending this much on streaming per month (total, all services)||Percentage of respondents willing to spend this much on streaming per month (total, all services)|
|$15 or less||16%||17%|
|$16 to $30||23%||24%|
|$31 to $45||19%||20%|
|$46 to $60||17%||23%|
|I don't know||6%||N/A|
About a quarter of those subscribed to streaming services are willing to spend between $16 and $30 a month on those services, 20% are willing to spend between $31 and $45, and 23% are willing to spend $46 to $60. Just 16% are willing to spend over $60 even though 19% do.
Spending between $16 and $30 per month is enough to afford a couple of subscriptions, especially if opting for basic packages or those that come with ads, which are priced at a discount.
Respondents seem to be aware of how much a single subscription tends to cost -- 62% are willing to spend between $5 and $15 a month on a single subscription while just 27% are willing to spend more.
|How much are you willing to spend per month on an individual video streaming subscription?||Percentage of respondents|
|$5 or less||11.25%|
|$5 to $15||61.92%|
|$15 or more||26.83%|
25% of video streaming service subscribers spend less than they're willing to; 20% spend more than they're willing to
Most Americans -- 55% -- that have video streaming service subscriptions are spending what they're willing to for those subscriptions. A fifth are spending more than they're willing to each month while a quarter are spending less.
Given that a quarter of consumers are spending less than they're willing there is opportunity for newer services to gain new subscribers as well as for more established providers to raise prices incrementally over time.Jason Moser, senior analyst and lead advisor at The Motley Fool
|Percent who spend more than they're willing to on video streaming services||Percent who spend less than they're willing to on video streaming services|
"Pricing power is one of the big questions that time will answer in the streaming market," says Moser. "Services with the best content will often be able to exercise modest pricing power over time which ultimately helps fuel new content offerings keeping subscribers in the service."
The fact that a quarter of subscribers are spending less than they're willing to could be a big opportunity for the industry as well, he continues.
"Given that a quarter of consumers are spending less than they're willing there is opportunity for newer services to gain new subscribers as well as for more established providers to raise prices incrementally over time."
Streaming subscribers value original and exclusive content most and live sports least
Streaming subscribers place the most value on original and exclusive shows and movies, followed by a library of previously aired shows and movies.
They value live programming -- cable, news, and sports -- least.
Features ranked from most to least valued among subscribers
- Original, exclusive shows and movies
- Previously aired shows and movies
- Access to movies currently in theaters (access may require an additional fee)
- Simple navigation/user-friendliness
- Live cable
- Live news
- Live sports
The fact that some streaming services focus on live TV and sports could be worrying to investors when these rank so low on the list – but is that cause for concern?
Here's what Moser has to say: "It all boils down to demand and when that demand for live content remains somewhat limited companies will only be able to charge so much for it."
"We will likely see this dynamic shift somewhat as more consumers migrate away from cable providers and toward streaming services but there is no question that it's a new paradigm for live offerings like sports and news."
55% of streaming subscribers have paid extra to watch a movie otherwise only available in theaters
Notably, 55% of streaming subscribers have paid an extra fee to watch a move they could otherwise only see in theaters.
I suspect we will see the content providers continue to work with theaters but perhaps the window of exclusivity for theaters will tighten a bit as more content and consumers move over to streaming platforms.Jason Moser, senior analyst and lead advisor at The Motley Fool
Access to movies otherwise only in theaters, even if for an additional cost, is the third most-valued feature for streaming subscribers.
This option is a relatively new one and has been deployed by only a few streaming services, such as HBO Max and Disney+.
Charging extra for a movie currently in theaters is "certainly a potential opportunity as consumers become accustomed to new ways of getting content," says Moser. "However the question still remains how theaters will ultimately recover from the past couple of years."
"I suspect we will see the content providers continue to work with theaters but perhaps the window of exclusivity for theaters will tighten a bit as more content and consumers move over to streaming platforms."
Are streaming stocks set for a blockbuster sequel or box office bomb?
There's no doubt that competition among over-the-top streaming platforms is heating up -- and consumers are aware of it.
A majority of Americans that subscribe to streaming services already have three or more subscriptions. A majority also believe that there are too many options and that they're getting too expensive.
Beyond competing among themselves, streaming platforms also need to fend off other companies and activities that compete for individuals' screen time, like video games and pre-pandemic activities that may make a comeback, like the movie theaters, restaurants, and more.
Those factors may be reflected in the fact that the major over-the-top platforms have experienced a slower pace of new subscriptions in recent quarters.
It's not all doom and gloom. A quarter of those who subscribe to streaming services are spending less than they believe their budget allows. Forty-four percent are spending more time watching content than the year before and a similar percentage are spending the same amount of time, despite other options being available.
The next round of earnings from streaming companies should offer more insight into whether -- and how -- they can continue to grow their subscriber base and if they're still strong growth stocks.
The Motley Fool surveyed 1,502 American adults subscribed to at least one over-the-top streaming service on March 2, 2022. 46.94% of respondents were male and 53.06% of respondents were female.
- Nielsen (2022). "State of Play."
Jack Caporal has no position in any of the stocks mentioned. The Motley Fool owns and recommends Netflix. The Motley Fool has a disclosure policy.