Netflix (NFLX) Survey Shows Un-Grandfathering and Amazon Prime Having an Impact - Jefferies

September 23, 2016 7:10 AM EDT
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Jefferies analyst John Janedis reiterated an Underperform rating and $76 price target on Netflix (NASDAQ: NFLX) after their proprietary survey of more 1,100 subscribers that have received the un-grandfathering/price change notification from Netflix. The results suggest that the price point could have a larger impact on cancellations and that Amazon (NASDAQ: AMZN) Prime's video platform is gaining share.

According to the survey results, 65% of respondents accepted the price change (81% of which accepted the $9.99 / mo plan, while 10% and 9% accepted the $7.99 / $11.99 plans, respectively). 7% of respondents have cancelled their subscription, while 4% plan on cancelling. 24% of respondents have yet to make a decision - though they assume the vast majority renew.

On the timing of the notifications. 26% of respondents received the notification in May, 23% in June, 26% in July, 18% in August, and 7% in September (through 9/15). They expect the ungrandfathering process will conclude in 4Q.

16% of the respondents who accepted the price change indicated that they would cancel their subscription if NFLX raised prices by another $1 in the next 24 months. 70% of this group also indicated that "further price increases" is the most likely factor to motivate cancellation in the future.

Both respondents who accepted the price change and those that are leaving NFLX identified original content as the most valued content category on the platform (41% and 40%, respectively) followed by net. / cable TV content (29% and 26%, respectively).

On Amazon Prime, most 50% of respondents that accepted the price change from NFLX identified Amazon Prime as another primary platform they use to watch video content (vs. 27% for Hulu). Among respondents leaving NFLX, 45% indicated that Amazon Prime will be their primary streaming platform going forward (compared to 14% for Hulu). Among all respondents that use Amazon Prime, 47% indicated they were watching more video on the platform in '16 vs '15 (20% indicated "less" and 33% reported no change).

For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.

Shares of Netflix closed at $95.83 yesterday.

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