Netflix (NASDAQ:NFLX) was already struggling in the United States, losing 130,000 domestic subscribers a quarter ago, sending Netflix stock much lower as a result.
Now, a recent survey taken by UBS sets the stage for even more shareholder setbacks. As it turns out, a sizable number of U.S. consumers say they’re likely to subscribe to the upcoming rival streaming service Walt Disney (NYSE:DIS), and they’re even willing to cancel an existing subscription to get it.
Consumer surveys are dangerous, of course. What people say they’re going to do and what they actually do aren’t always one and the same.
In this case, though, the picture being painted by the UBS survey jibes with other findings that point in the same direction.
Survey Says Netflix Stock Is Vulnerable
It’s a debate that’s been raging for years: How well can Netflix stand up to streaming competition once that competition gets serious? Confidence in the company’s ongoing dominance seemingly strong, but a closer inspection of that support reveals a great deal of it is coming from current owners of NFLX stock. They’re arguably a tad biased.
The bulk of that bias could snap soon, however, if the underlying message delivered by the latest UBS survey is any indication. In short, as of mid-August, 43% of U.S. consumers say they have plans to subscribe to Disney+, slated for launch in November.
Of that 43%, 57% of them (or 24.5% of the total number of individuals surveyed) said they’ll cancel a rival service to make room for the new one in their lives.
That’s where Netflix’s dominance becomes something of a liability. Serving the most customers means it has the most customers to lose.
Such comparisons mean less and less though. The streaming piece of Prime also encourages using Amazon’s ecommerce platform; Prime members spend more than twice as much at Amazon.com as non-Prime members do. Disney also owns most of Hulu, and will offer a bundled package of it, Disney+ and ESPN that’s drawing a lot of attention already. Disney can also monetize its content in other ways, and in most cases, will already have done so.
Netflix, in the meantime, only drives revenue one way, with one platform.
The Future Looks Different
The results of the UBS survey have materialized at a time when the streaming industry has fully matured.
The arrival of Disney’s alternative to Netflix is evidence of that idea, though the now-crowded field already made it clear. It will join Hulu and Prime on the SVOD landscape, while Apple (NASDAQ:AAPL) is making its way there. AT&T (NYSE:T) isn’t far behind Apple, aiming to launch a new-and-improved streaming service later this year.
CBS (NYSE:CBS) is even finding surprising traction with its home-grown, niche-minded streaming platform, which reportedly boasts 8 million paying customers versus the 30 million subscribers expected for Disney+ by 2024.
The advent of so many services at essentially the same time in the industry’s life is testing the theories about how many different streaming subscriptions a consumer is willing to pay for.
The estimated number has changed over the years, but a separate survey taken by UBS in June further gels the figure at right around three, if not less. That survey indicated that only 13% of consumers were willing to pay for more than three OTT services.
That finding opens the door to the possibility that consumers could enjoy Disney+ and remain a subscriber to Netflix, rather than choose one over the other.
Other data suggests Netflix may not be as firmly positioned as it and owners of NFLX stock want to think it is, however. Last quarter’s decline of 130,000 North American subscribers? It was the first-ever dip in the company’s domestic headcount, taking shape following a price-hike that hadn’t proven problematic in the past.
Suspiciously, the domestic headwind started to take shape only when there were several quality alternatives to Netflix available to consumers.
Bottom Line for Netflix Stock
It’s a mostly-unpopular notion to suggest Netflix is anything but infallible; a small handful of Netflix shareholders really, really love the company and aren’t shy about vocally defending it. Their support usually leveraged the admittedly-impressive past growth trajectory.
Those historically-based arguments hold less and less water though. The case against Netflix stock is rooted in the current transition underway right now. It only began in earnest earlier this year, and won’t peak until later this year when Disney+ is finally launched. The fallout impacting Netflix, if there is one, is anything but clear yet.
The cracks are starting to form though. Last quarter’s domestic subscriber loss was one of them. The shift puts a massive amount of pressure on Netflix’s international business.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about him at his website jamesbrumley.com, or follow him on Twitter, at @jbrumley.