It used to be impossible to choose something to watch on Netflix because there were so many great movies and TV shows. But now, it feels like it can be difficult to choose something because the selection feels more and more limited.
During their quarterly earnings call this week, Netflix commented that the missed target of subscriber growth was likely due to a small price increase a few months ago, where all subscriptions increased $1 per month. Jim Cramer on ‘Squawk on the Street’ commented that he was shocked that people would cancel over what seems like a relatively arbitrary amount.
But both Netflix and Cramer can’t see the forest through the trees on this earnings miss. This subscriber slowdown has very little to do with $1 more a month and far more to do with the Netflix library drastically decreasing.
We reported last month that the Netflix library has fallen 40% over the past four years, and this is clearly the reason people are starting to cancel their Netflix accounts. The one dollar price increase was merely a check-in for Netflix subscribers, many of whom are now realizing that their Netflix usage is declining, both as the Netflix library shrinks as well as other competitors cropping up. When presented with the alert that their Netflix subscription price was going to jump up ever so slightly, it was a reminder to check in on just how much utility the service was offering.