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Needham's Martin Defends Her Prediction That Netflix Subscriptions Will Fall

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Needham's Martin Defends Her Prediction That Netflix Subscriptions Will Fall

Notable Netflix Inc (NASDAQ: NFLX) analyst Laura Martin said in a Tuesday note to clients the streaming media giant could lose 4 million subscribers in the U.S. in 2020.

The Needham analyst defended her thesis in a Fox Business interview Thursday and said it's a matter of basic economics.

Why Pay More?

Netflix's competitors offer streaming packages in the $5 to $7 range, and if Netflix doesn't follow suit, millions of consumers will stop paying twice as much in favor of the cheaper option, Martin said. 

Consumers are also free to turn their Netflix membership on and off at any point for any reason, the analyst said. 

Needham's survey of consumers found 30% of Netflix subscribers cancelled their membership to watch HBO's "Game of Thrones," she said.

Once "Game of Thrones" ended, the consumers resumed their Netflix membership. 

The math behind Netflix losing 4 million subscribers is based on a similar assumption that 30% of all U.S. users will on average turn off their service for a few months each, Martin said.

Netflix Offers More Content

Netflix's monthly cost is more expensive than its rivals, but it also offers "a lot more content," MarketWatch technology editor Jeremy Owens said on the same Fox Business segment. 

The amount of content is large enough for Netflix users to keep their membership while bouncing between other rival services, he said. 

Martin responded and argued that Netflix's original shows are typically cancelled before their fourth season.

Shows that lasted much longer than four seasons and were smash hits like "The Office" and "Friends" are migrating away from Netflix and finding new homes at competing streaming services, the analyst said. 

Netflix shares were trading 0.24% higher at $299.17 at the time of publication Friday. 

Related Links:

Netflix Analyst Downgrades Stock, Says Streaming Service Lacks Operating Leverage

A Little Perspective On The Early Subscriber Numbers For Disney+

Photo courtesy of Netflix. 

Latest Ratings for NFLX

DateFirmActionFromTo
Jan 2020MaintainsBuy
Jan 2020MaintainsOutperform
Jan 2020MaintainsNeutral

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