×

Netflix’s Latest Price Hike May Have Scared Away Low-Income Consumers (EXCLUSIVE)

Netflix’s recent price increases may have scared away low-income consumers: New data released by Earnin, a service that targets this group of consumers with cash advances, shows that growth among low-income users has stalled while other paid streaming services have continued to add new users.

The percentage of Earnin customers who subscribe to Netflix has been flat for some time, the company’s economist Peter Griffin wrote in a blog post Tuesday. That’s despite the fact that the overall usage of paid streaming services has grown notably among Earnin users, with both YouTube and Hulu adding paid users.

CREDIT: Courtesy of Earnin

That trend has been particularly pronounced ever since Netflix’s most recent price increase. The streaming service raised its prices at the end of 2017, bumping the monthly charge for its HD tier from $9.99 to $10.99. The price for the company’s family plan, which includes the ability to stream to up to four devices and access streams in 4K HDR, increased from $11.99 to $13.99.

“When Netflix raised its prices over six months in 2016, market share (in total dollars) grew accordingly,” Griffin wrote in a blog post Tuesday. “In 2018, the increase deterred new subscribers living paycheck to paycheck from joining the platform while Hulu and YouTube grew memberships in that period by 4.5% and 15% respectively.”

CREDIT: Courtesy of Eanin

Earnin has been able to gather this type of data because of the fact that it has access to its members’ banking transactions as a way to verify their monthly income. That way, the company was also able to learn that one in eight Earnin users has had an overdraft fee because of a subscription service in the past year.

Following recent banking regulations, banks have to reject charges rather than bill customers for overdraft fees. However, there’s a loophole: “Unfortunately, recurring payments were excluded, allowing streaming services bills to routinely trigger fees,” Griffin explained. “This exception is also compounded by the common practice of fee maximization. As long as a bank includes it in their fine print, they can reorder transactions to maximize the likelihood that recurring transactions trigger overdraft fees.”

In the end, low-income consumers actually pay more for streaming services than consumers who don’t have to fear overdraft fees. “Streaming services cost about $0.80 more per month once you account for the chance they trigger an overdraft,” said Griffin. “Over the past 12 months, this additional cost has averaged $0.78, $0.83, $0.79 more a month for Netflix, Hulu, and YouTube, respectively.”

It’s worth noting that Earnin’s data comes with a few caveats. First of all, the service is based on an app, which means that Earnin’s customers aren’t necessarily representative of all lower-income consumers.

Netflix has also for some time offered alternative payment methods, including gift cards that can be bought in retail stores and that likely appeal more to consumers who try to avoid overdraft fees. A Netflix spokesperson declined to comment on any trends in the usage of prepaid cards.

Still, the data is interesting, even just taken as anecdotal evidence for price sensitivity among low-income consumers. And it also goes to show why so many companies continue to invest in ad-supported streaming services. After all, you’ll never have to pay an overdraft fee for something that’s free.

RELATED CONTENT:

More Digital

  • T.J. Dillashaw, right, kicks Cody Garbrandt

    Disney Plans UFC Broadcast for FX

    UFC matches will return to FX  – but not on a permanent basis. ESPN has been showing preliminary bouts to UFC pay-per-view events for the last while on ESPN and ESPN2, and then showing the main card on its ESPN+ subscription video service. In September, the early lineup will air on FX, which the UFC [...]

  • fundo logo

    Google‘s Area 120 Is Testing Fundo, a Crowdfunding Service for Creators (EXCLUSIVE)

    Google’s skunkworks lab Area 120 has been quietly testing an events-centric crowdfunding service for YouTubers, Variety has learned. Called Fundo, the service allows creators to invite their fans to virtual meet & greet sessions and other paid online events. A Google spokesperson confirmed the testing in a statement provided to Variety: “One of the many [...]

  • Telling Lies - Logan Marshall-Green

    Sam Barlow's 'Telling Lies' Government-Surveillance Thriller Game Sets Release Date

    After more than two years in the works, “Telling Lies” — the investigative thriller from acclaimed game creator Sam Barlow — is ready to take the stage. The game, produced with and released by Annapurna Interactive, will be available next Friday, Aug. 23, via Steam and Apple’s Mac and iOS app stores. “Telling Lies” will [...]

  • YouTube logo

    YouTube Will Stop Letting Copyright Holders Seize Revenue via Manual Claims on Very Short Music Clips

    YouTube is pushing back against overzealous copyright policing by music companies. Starting in mid-September, the video giant will forbid copyright holders from making manual claims to commandeer revenue generated by YouTube videos that include very short music clips (e.g., five seconds of a song) or “unintentional” music (like music from passing cars). “One concerning trend [...]

  • Chelsea Handler memoir book buy online

    Chelsea Handler Bonds With Alexa in iHeartRadio Smart Speaker Promo

    iHeartRadio has teamed up with Amazon to promote Chelsea Handler’s podcast “Life Will Be The Death Of Me.” Beginning this Thursday, users of Amazon’s Echo smart speaker and other devices with Alexa built-in can opt to get their mornings started with Handler cracking jokes and exchanging banter with the smart assistant. Users simply have to [...]

  • David Messinger, Activision Blizzard

    Activision Blizzard Hires CAA Veteran David Messinger as CMO

    Activision Blizzard tapped David Messinger, a former 15-plus-year veteran of CAA, as its first corporate-wide chief marketing officer. Messinger, based in Santa Monica, reports to Coddy Johnson, Activision Blizzard’s president and COO. It’s the first time the video-game company has appointed a CMO who will oversee the global marketing operations across all of Activision Blizzard [...]

More From Our Brands

Access exclusive content