One-third of SVOD buyers in the United States are set to reduce subscription spending

New research from Aluma Insights finds 35% of subscription video-on-demand customers are spending too much on streaming services and are looking to cut back. This represents a 40% increase over last year and threefold that of 2019. Only 5% are interested in spending more on SVOD services, down 38% from 2022.

"That only one-in-twenty SVOD buyers are open to adding a new subscription service is the latest indicator that US demand is all but exhausted. This does not mean mature SVOD providers will not add subscribers, only that such additions will be fewer in number, require more aggressive promotions, and be zero-sum purchases – that is, for every new service added, another must be cancelled,"  said Michael Greeson, Founder and Principal Analyst at Aluma.

While there remain “green field” opportunities for SVOD providers, broadband is available to more than 90% of US households, leaving only 10% or roughly 14 million households to be served. While federal subsidies for build-outs into unserved areas may help bring many of them online, it will be years before deployments are complete, Aluma noted. Moreover, there is no guarantee those unserved by broadband will be heavy buyers of streaming video services.

Consumers are increasingly frustrated by ever-greater monthly streaming expenses and it is only going to get worse, the report assured. With most SVOD providers still bleeding cash, growing subscriptions has taken a backseat to optimizing revenue via higher prices, layoffs, and decreased content spending, among other measures. Adding to this the ongoing strike of writers and actors, it is all but certain the quality of content will decline even as prices increase.

On a positive note, inter-network SVOD bundles that combine services from competitive operators and offer subscribers a discount to standalone pricing are finally attracting the interest they deserve. Intra-network bundles like Disney's package of Disney+, Hulu and ESPN+ have largely run their course will take a back seat to so-called “super bundles” that more closely resemble pay TV services – not MVPDs per se, but app bundles that borrow several key elements of that model.

"Content owners that have long competed head to head with one another will engage in strategic bundling with competitors. This is not some kumbaya moment for the streaming industry, but a strategic necessity for SVOD operators, much as joining cable TV bundles was for large over-the-air broadcasters more than 50 years ago. It is about survival in an hyper-competitive marketplace,"  Greeson concluded.

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While the fragmentation of the relatively young subscription video-on-demand (SVOD) industry continues, Netflix is still the preferred streaming platform of choice for most Americans surveyed in the latest Statista Consumer Insights. However, compared to two years ago, the company's offering seems to have lost a bit of its shine.

In 2021, 79% of respondents claimed to be paying Netflix customers. This number went down to 69% this year, with Prime Video seeing a similar albeit less drastic decrease in usage. While the exact reasons for this usage decline contrasted with the overall growth of Netflix – which now boasts about 238 million paid subscribers – are hard to pinpoint, one reason could be the increased competition in the market.

For example, Peacock, operated by NBC Universal and, by extension, broadcast giant Comcast, and Paramount+, which features exclusive shows in the Star Trek universe, had not yet gained traction in 2021. The former had only just been introduced in July 2020, while the latter had been around as CBS All Access since 2014 but only gained a broader library after the re-merger of CBS and Viacom at the end of 2019.

Over the last couple of years, SVOD services have become the driving force behind video consumption and have also begun influencing areas reserved for regular TV shows and movies in the past. For example, since 2018, Netflix productions have consistently earned more than 100 Emmy nominations per year.

According to Statista, the actual market size of subscription-based video is hard to gauge precisely, though. Some estimates for 2022 range from US$80-100 billion worldwide, while the Motion Picture Association representing the five major US studios – Sony Pictures, Disney, Universal, Warner Brothers and Paramount as well as Netflix – gave an estimate of US$42.5 billion for the digital video market in 2021.