Reed Hastings' endorsement of Kamala Harris spark a surge in Netflix cancellations

In July 2024, Netflix faced an unusual spurt of Netflix cancellations after its co-founder and chairman, Reed Hastings, endorsed Kamala Harris's presidential bid. Hastings, a well-known Democratic donor, posted his endorsement of Harris on social media, donating $7 million to a pro-Harris super PAC at the same time.

While Netflix has the best churn rate in streaming, which is hardly a null event for any business, political spillover from involvement by Hastings caused a short-term yet not at all inconsequential burst in cancellation for Netflix. A study firm, Antenna, reported that the net churning rate almost trebled in days following Hastings' endorsement which was at its peak on July 26.

It had become the worst day for cancellations at Netflix in 2024, and political tensions were compounded by the fact that Trump supporters and conservative voices signed behind the #CancelNetflix movement. This was a brief spurt in the cancellation of the services of Netflix but a wave re-igniting the idea about the effect of corporate leadership political endorsements on business performance.

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How did Reed Hastings’ endorsement trigger Netflix cancellations?

There is a reason why the subscribers of the Internet streaming giant cancelled in droves, mostly conservative viewers, following the announcement of Netflix's founder Reed Hastings to openly endorse Kamala Harris. His social media post ended up triggering many of Harris' opponents, including fans of Donald Trump, to use #CancelNetflix on their social media to dissuade others from keeping their subscriptions.

This movement quickly gained steam, driving the churn rate up within days. The response was like the previous ones, whether it was a Conservatives' boycott of Netflix back in 2020 over the film Cuties. Netflix cancellations, however, this time was still only at a modest level.

Reports state that the churn rate this time was three times what Netflix would normally receive but it happened for several days. That aside, this affair does prompt one to ask questions about the financial impacts that political endorsements may have on consumer behavior in the face of increasing political polarization.

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Was the Netflix cancellations spike due to politics or other factors?

While Hastings' endorsement of Harris no doubt played a significant role in the uptick, though, other factors could have contributed to the increase in cancellations. In July, Netflix discontinued its basic, advertisement-free subscription tier for consumers. This change alone caused some form of dissatisfaction on the side of the subscribers, thrusting the churn rate to 2.8%, the highest since February.

Nevertheless, the timing of the spike immediately after Hastings' political activism leaves an impression that it was politics, perhaps, that was pushing the wave of Netflix cancellations. While it is hard to measure the political blowback, the move by Hastings to support Harris may have occurred at a point where the rising unease of customers could manifest as discontent in pricing. Though some subscribers may have considered Netflix cancellations partly due to the changed structure, it could have been the last straw for others.

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Can entertainment companies avoid political backlash?

Netflix cancellations have shown to be a growing concern for entertainment companies whose leaders endorse views on certain political issues. Reed Hastings is not the first head who attracted consumer groups based on his political opinions, but recent cases such as the controversy between Walt Disney-Florida Governor Ron DeSantis clarify the fine line these executives have to tread.

Increasingly now, companies find themselves in a politically charged environment wherein private donations see public scrutiny and resultant consumer boycotts. It's difficult to predict the long-term implications, but the past two times controversy erupted at Netflix, it soon fizzled and proved minor in the service's subscriber losses.

Still, the episode points to a larger trend of consumers rebuking companies for their political affiliations that may continue to pose risks for firms as they attempt to navigate a highly divided political environment.

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