Netflix subscriber losses hint at consumer pushback on prices

Love may be blind, but consumers aren’t. At least when it comes to higher prices.

A couple dollars more a month normally isn’t enough to move the needle, but when Americans are facing the fastest inflation in 40 years, something has got to give. And for 600,000 people in the U.S. and Canada, that something was their subscription to Netflix Inc.

Consumer spending is by far the biggest contributor to the U.S. economy, and economists are keenly looking for any signs that higher prices are starting to chip away at demand. The latest quarterly results from Netflix, which counts TV shows like “Love Is Blind” and “Bridgerton” among its biggest hits, may provide some evidence that it’s already in motion.

“It’s a very early signal,” said Neil Saunders, managing director at GlobalData. “One of the things people will most certainly look to cut as inflation bites are those recurring payments month in and month out, and that obviously includes streaming.”

Earnings season is just getting underway, and there are other pockets of the economy where consumers are pushing back on higher prices. Retailers like Bed Bath & Beyond Inc. blamed slowing sales in part on inflation that’s hurting consumer confidence, and grocery chain Albertsons Inc. is bracing for less spending by lowerincome customers as food bills surge.

For Netflix, there are a few other factors at play. Competition from other streaming services like Hulu and Disney+ is heating up, and as the world returns to normal, people are eager to get off the couch and start living again.

How that will play out in other corporate earnings remains to be seen. Economists have been expecting consumers to shift more of their spending dollars from goods, like home furnishings and cars, to services that include travel and dining out as Covid restrictions are lifted. But with inflation taking a bigger bite out of paychecks, there’s less real discretionary income for purchases beyond the necessities.

“It’s clear that the cost of living crisis will be forcing many Americans to reconsider their spending decisions,” said Craig Erlam, senior market analyst at Oanda. “While there may still be some excess savings, it’s only natural that households are seeing costs rising and considering where they can cut back.”