A subscription cancellation spree has become rampant–but not for Netflix's service issues or downtimes. In this case, these cancellations are attributed to a $7 million donation by Netflix CEO Reed Hastings to Kamala Harris, one of the presidential candidate frontrunners in this year's upcoming U.S. elections.
How Significant Are The Cancellations?
A recent Bloomberg report stated that in July, Netflix saw a higher cancellation rate among U.S. customers, reaching 2.8%, the highest since February. This increase is primarily driven by the company's decision to discontinue its basic tier, which was the most affordable ad-free option. However, the five days following Hastings' endorsement were particularly unusual, even for July.
Following Hastings' endorsement, Donald Trump supporters began encouraging others to cancel their Netflix subscriptions. Many shared photos of their cancelled accounts using the hashtag #CancelNetflix. Just three days after the donation was made public, July 26 became Netflix's worst day for cancellations this year.
Separating Corporate Work From Political Views
It is worth noting that Hastings has long been committed to civic engagement. While launching Netflix, he was already involved in education reform, dedicating significant time and resources to supporting charter schools. As his wealth grew, he and his wife donated billions to philanthropic causes.
Although he hadn't been particularly outspoken about elections until recently, earlier this year, he joined the public chorus of celebrities and executives urging Joe Biden to withdraw from the presidential race. At that time, he told The New York Times that Biden "needs to step aside to allow a vigorous Democratic leader to beat Trump and keep us safe and prosperous".
Netflix, meanwhile, has consistently sought to separate Hastings' political activities from its business, being mindful of its global audience and cautious of appearing politically biased.
Has This Affected Netflix's Financials?
Despite the fall-off of Netflix amongst right-wing voters–including top Republican figures like Marjorie Taylor Greene–there is still high optimism that this won't affect Netflix's financial standing. This is despite other controversial moves by the company lately, including saying no to password sharing amongst users.
As of June 30 this year, Netflix had 277.65 million paid subscribers worldwide. The company is now generating close to $10 billion in revenue each quarter, with profits exceeding $2 billion, and its stock is trading at over $700 per share. Earlier this week, investment analysts at KeyCorp lifted Netflix's price target from $735.00 to $760.00 in a note issued to investors.
The analysis from KeyCorp also highlights Netflix's strong content lineup as a major factor behind the increased price target. The analyst expects no significant surprises when looking ahead to the next quarter's results and guidance for the following quarter. The optimistic outlook is supported by the timing of crucial content releases at the end of the fourth quarter, including high-profile titles such as the NFL on December 25 and Squid Game 2 on December 26.
After All, Corporate America Shuns Trump
It is worth noting that data from the Yale School of Management, released in June this year, revealed that none of the Fortune 500 CEOs are willing to support former President Donald Trump's presidential candidacy.
While Trump garnered support from two CEOs in 2020, no prominent Fortune 500 CEOs have shown support for him in the upcoming election.
"They didn't flock to him before and certainly aren't flocking to him now. Mr. Trump continues to suffer from the lowest level of corporate support in the history of the Republican Party," Sonnenfeld stated back then.
Sonnenfeld explained that much of the backlash from Fortune 500 CEOs is due to Trump's ideologies, which have fueled protectionist, isolationist, and xenophobic actions. These include events like the white supremacist rallies in Charlottesville, Virginia, and the January 6, 2021, attack on the U.S. Capitol.
What's In It For Netflix This Coming Months
While political contributions by high-profile executives can stir controversy and lead to backlash, as seen with the #CancelNetflix movement, the company's robust content offerings and global reach have helped it weather such challenges.
Despite short-term volatility, Netflix's sustained subscriber growth and robust financial performance suggest that its long-term success depends more on its ability to deliver compelling content than on the political activities of its leadership.
