As the market and number of video streaming services continues to grow worldwide, customer choice is expanding and with it, the rate of subscriptions, cancellations and subscriptions (aka “churn”), will grow by 30% in 2022, with 150 million paid subscriptions expected to be cancelled next year alone, according to a new report from Deloitte.
However, more subscriptions are expected to be added than cancelled with the average number of subscriptions rising and in markets with the highest rate of churn, a large number of subscriptions to services previously cancelled.
“These are all signs of a competitive and maturing SVOD market. As SVOD matures, growth across global regions that may have different cost sensitivities will likely require different business model innovation and pathways to profitability,” Deloitte said.
Obviously SVOD providers are not fond of churn (with some in the U.S. spending up to $200 on average to acquire each subscriber), and the growing number of streaming services in the U.S. in particular is prompting subscribers to become overwhelmed managing and paying for such services. In response, subscribers are more likely to cancel fee-based services in favor of FAST (free ad-supported television) channels Deloitte said.
“The net result is that, in 2021, around 80% of households in the United States had a paid SVOD subscription, with about 35% churn,” the research firm said. “Providers seeking to retain customers through the strength of their content are spending billions of dollars annually to develop and acquire top-tier programming. But it may not be sustainable to spend so heavily, and consumers will only take so many price hikes. More US SVOD providers are hence looking to pricing as another lever to fight churn, offering cheaper or free ad-supported packages.”
Deloitte says that the European market most resembles the U.S. scenario, where churn ranged from 7-23% and that increased competition will result in a churn rate that won’t exceed 25% in 2022. In Latin America, local content is more valued and many use ads to subsidize the costs of subscriptions, resulting in a lower churn rate.
In Asia, free, ad-supported video-on-demand (AVOD) services predominate and service providers are also more likely to add value to subscriptions with gaming and music and mobile first engagement, which tends to insulate providers from high churn rates.
“The Asian model may inform how U.S. services can expand globally and how providers in Europe, Latin America, and Africa can grow their own offerings,” Deloitte concluded.. “As SVOD matures in multiple markets, we predict that their growth will be increasingly based on ad-supported models, and that the metric for SVOD success will be less about subscriber count and more about overall revenue from all services and sources. This may favor media companies that offer more than just streaming video.”
