Feel the Churn: What the Changing SVOD Market Means for Streamers
If the main battle of the streaming wars thus far has been to gain as many subscribers as possible, the next major fight will be to keep them.
Subscriber churn is a persistent and growing problem for streamers trying to build sustainable user bases, as consumers increasingly cancel and restart subscriptions and hop between platforms from month to month.
The proliferation of streaming services has naturally led to an uptick in churn over the past three years. From the start of 2019 to the end of 2021, analytics firm Antenna’s weighted average of the monthly SVOD churn rate grew from 3.2 to 5.2 percent. In addition, one-third of consumers surveyed in a recent Deloitte report had both added and canceled a streaming subscription in the past six months, as of December 2021.
And this may be a best-case scenario for the foreseeable future. Churn will only accelerate as the economic climate worsens and consumers cut back on unnecessary spending amid rampant inflation and a looming recession. The question then becomes, which services will be considered “unnecessary” or worth canceling?
Obviously, the answer will vary among individuals and households. Families with young children will be more likely to hold onto Disney+, for example, with its arsenal of kid-friendly content. Prestige TV fans will probably stick with HBO Max and Hulu, both bastions of acclaimed, adult-skewing drama series.
But if there’s a clear Most Valuable Player in the streaming game, it’s still the Big Red N.
Yes, Netflix is down, and the other major streamers are on the way up (in subscriber growth and penetration, if not on Wall Street). The service’s monthly churn rate jumped a full percentage point between December 2021 and March 2022, per Antenna — likely a reaction to its January price increase. With plans ranging from $9.99 to $19.99 per month, Netflix is now among the most expensive SVOD subscriptions on the market. (By comparison, the Disney Bundle, at $19.99 a month, offers Disney+, ESPN+ and ad-free Hulu.)
But while Netflix growth has stalled, at least for now, we’re not seeing its user base crumble just yet. As the pioneer of the streaming space, and likely the first SVOD subscription most consumers ever purchased, Netflix is still synonymous with streaming TV for many people.
Nielsen data shows that Netflix has remained the most watched individual streaming service, with its share of TV viewing time consistently between 6 and 7 percent over the past year. And its share of global demand for original content, while down from years past, remains at a staggering plurality: 45 percent versus Amazon’s 11 percent and Disney+’s 8.8 percent, according to Parrot Analytics.
Meanwhile, a recent report by Hub Entertainment Research found that 68 percent of Netflix users ranked the service a “must-have,” as opposed to a “nice-to-have” or one they could do without. That puts Netflix on par with YouTube — a platform, Hub’s report notes, “for which there is no easy substitute” — and makes it the most valuable SVOD service among its users by a significant margin.
As with everything in life, however, that status is only for now. There’s little doubt Netflix’s dominance will continue to erode; the question is how fast that will happen. And it remains to be seen whether the changes on the way — a cheaper ad-supported tier, a shakeup in the company’s film strategy — will be able to slow or reverse that trend.
What, then, will take its place as Most Valuable Streamer? As far as consumers are concerned, it might be nothing.
We’re approaching a marketplace made up largely of savvy streaming customers who jump between services and juggle subscriptions — “churn and return" — with ease. (Younger generations, Deloitte’s report notes, are more prone to canceling and then resubscribing to a service.)
Q1 2022 saw nearly 30 million sub cancellations in the U.S., Antenna reported, but also 37 million additions, another sign that consumers are shuffling their subscriptions. Antenna data also indicates many users who canceled Netflix signed up for another streaming service last quarter.
It’s a portrait of consumers adapting to an overcrowded, expensive market, and these trends will accelerate in a recession, which will force people to manage their money more carefully. If streamers want to keep their subscribers, they’re going to have their work cut out for them when the years of plenty come to a decisive end.
