14 MAR 2023

USA: Which streaming services are essential for local audiences?

Two-thirds of Netflix buyers in the United States view the service as indispensable to meeting household video needs, while Hulu and Disney+ are considered essential, according to new research from Aluma Insights.

14 MAR 2023

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Two-thirds of Netflix buyers in the United States view the service as indispensable to meeting household video needs, according to new research from Aluma Insights. Hulu and Disney+ were the only other top-16 services in which more than half of subscribers considered the service essential instead of just nice to have. Conversely, Epix Now, Apple TV+ and Peacock were found to be the least essential services.

“This is one way of comparing a service’s utility with that of its competitors. It says to some owners you have a bit more latitude when it comes to revenue optimization measures, such as cracking down on freeloading or increasing retail prices. It says to others there is great risk in significantly altering prices or service terms,”  noted Michael Greeson, veteran researcher and founder of Aluma Insights.

To this point, Disney’s CEO, Bob Iger, recently shared that December’s 38% increase in ad-free Disney+ prices caused minimal subscriber losses, suggesting the service is not yet fully valued. Aluma analysts agree, and expect both Disney+ and Hulu standalone prices will increase by around 15% during 2023.

According to Aluma, finding Apple TV+ and Peacock among the bottom three services was unexpected. Apple TV+ is recognized for high-quality original content that resonates well with its subscribers. However, it has little depth in terms of third-party content and lower value than most other services, which may have reduced its stickiness.

Peacock is also prone susceptible to disruption, this despite a 28% increase in paid subscribers during 2022. Nearly three years after its introduction, the service still suffers from “failing to launch,” as its content selection is long anemic. Even as it works to improve its library, however, Peacock’s owner Comcast is eliminating the service’s free ad-supported tier and is phasing out complimentary service for Xfinity subscribers, an audience the company estimates accounts for at least 70% of Peacock’s paid subscribers. “If 65% of Peacock subscribers consider the service dispensable, and Comcast is ending free service to 70% of Peacock’s subscribers, there is a real risk this strategy will backfire in 2023,”  Greeson said.

A greater risk to less-essential services is plateauing monthly SVOD spending. Aluma found that, in 2022, SVOD households spent on average US$43.25 per month on the services, up significantly from 2020 but mostly stable compared with 2021. However, between 2020 and 2022, the percentage of SVOD buyers open to spending more declined from 14% to 8%, while the percentage planning to reduce these expenses increased from 17% to 25%.

“As buyers move closer to their SVOD spending limits, less essential services will have a difficult time optimizing revenue without enduring sizeable subscriber losses,”  Greeson concluded.