Subscription-video “churn” rates jumped about 85% during the pandemic, as locked-down audiences widely sampled the many new services that launched the past 18 months, but also quickly moved on to new platforms to catch high-profile programming.
That’s just one finding about the rapidly evolving online-video space since the pandemic hit, changing how Hollywood works and how audiences see much of what’s still called “TV” and “movies,” according to the latest Digital Media Trends Survey from consulting giant Deloitte.
“Before the pandemic, churn rates were around 20%, and they actually went down early in pandemic,” said Kevin Westcott, Deloitte vice chairman and leader of its technolog, media and telecommunications practice. “Now, we’re seeing churn rates above 35% (actually, 37 percent). What we see people doing is they’re signing up for a specific series or show they want to watch, then cancelling and signing up for other services. Only 3% (of those cancelling) aren't replacing one service with another.”
The study also found a notable shift by younger audiences away from film and TV as their top entertainment preference. Combined with the report’s other findings, which have been echoed in other studies, it all suggests plenty of complications ahead for the numerous streaming services that have debuted from Hollywood studios over the past 18 months.
Deloitte has tracked user sentiment about film, TV, online video, social media, music and gaming for 15 years, but 2020 was unique in that the company ended up surveying users three times over the course of the pandemic, Westcott said. That provided an unusual opportunity to track how behavior evolved during a period that transformed Hollywood business models and audience viewing habits at seeming light speed.
Beyond those churn numbers – which translate to much higher customer acquisition (and re-acquisition) and retention costs – the study highlights several shifts in how audiences consume all kinds of entertainment, and even highlights the slipping primacy of film and TV as the leading source of entertainment for younger viewers.
Notable findings
- More services. Before the pandemic, households subscribed to between three and four streaming services, Westcott said. That jumped to an average of five per household early in the pandemic, before falling back to four apiece more recently. But while 35% of consumers are dropping services regularly, they’re signing up elsewhere for another hot show.
- More price sensitivity, at least in terms of hikes in subscription fees. Almost half said increased prices are the “most likely cause” for stopping a paid video service, easily the biggest motivator of nine available reasons in the survey. Conversely, the prospect of interesting new shows or movies is the biggest reason a consumer might stick around. That puts a premium on regularly debuting new high-profile programming that can keep an audience engaged, Westcott said.
- More fragmented viewing. Finding a show has gotten way too difficult. . Two-thirds of consumers say they’re “frustrated when content they wanted to watch is no longer available on their streaming video services.” This may eventually ease as studios keep more of the shows the produce on their own streaming platforms rather than licensing it widely, Westcott said. But for now, the sheer number of big new services and a still-robust business of licensing programming to other distributors means many high-profile shows move on and off platforms regularly (one example: the Harry Potter movies were part of HBO Max’s debut, then shifted back to Peacock by August, before beginning to leave that platform early this year).
- Discovery, recommendations and easy access are headaches too. About half of consumers said they were frustrated by the challenges of discovering content, the need for multiple subscriptions, and the quality of content recommendations. Content recommendations relied mostly on what else we’ve watched on a service. In the future, those recommendations might get sharper by knowing what books, audiobooks, podcasts, musicians, games and other entertainment we enjoy also, Westcott said. Aggregating all that content, as Amazon
AMZN and AppleAAPL do with their respective bundles, could inform not only better content recommendations, but better advertising targeting too.
Hello to the Mid Tier
- Returning to the (ad-supported) middle: Expect more services to offer mid-price, ad-supported tiers, likely with access to less content than on the full-price subscription flagship, and in less timely ways, like 45 or 90 days after initial release. More than 60% of consumers in the survey are okay with subsidized services featuring 6 minutes of ads per hour, as long as the ads are “targeted, relevant and non-repetitive.”
- Premium VOD is a winner. The study found overwhelming approval for the pricey, early-access home streams on high-profile movies, a near-unique response. “For those customers who've tried PVOD, the overwhelming majority, 91%, said they'd do it again,” Westcott said. “I've never seen a reaction that strongly on the positive side for an entertainment experience.”
- Different movies will get different release treatment. The film with a mid-sized budget of, say, $40 million to $60 million won’t be going to theaters anymore at all. It’s too expensive to roll out the “Prints & Advertising” budget to make those films pencil out economically. They’re heading instead to Netflix
NFLX and the other streamers, where they can efficiently reach a targeted global audience. - Younger generations care less about film and TV than games and music. In a very big long-term trend, Gen Z teens and 20-somethings are far less interested in traditional movies and TV shows than they are in music and video games. That’s a marked shift from all older generations, Westcott said. In fact, much of Gen Z use of social media is as a gateway to discovering and sharing music and gaming (think Twitch streamers talking about games, and hip hop star Travis Scott performing in Fortnite).
Aggressive Discovery Help
Given the churn challenges, Westcott said streaming services need to be aggressive about how they let new users find out about all the other content available on their platform. Given subscribers’ willingness to flit from service to service, providers have only a short window of time to show what else might be worth paying for on the service.
It’s important that services do a better job “finding content (the consumer) wants, and figuring out how to expose the consumer to all the entertainment options I have on my platform,” Westcott said. “Am I doing a good job introducing them to other kinds of content that may be of interest?”
The services most likely to thrive in the evolving moment “aggregate a lot of entertainment, not just their own, and offer different models to different kinds of subscribers,” from subscription to mid-priced tiers with light ad loads to fully ad supported services that feature mostly older content.
“I think that's the direction we're going to go,” Westcott said.
