The shift to streaming video has been extremely successful at disrupting television, though potentially far less profitable. Like TV and movies before them, SVOD companies have relied on the innate emotional and intellectual value of their stories to engage audiences and monetize their attention. As more major media providers launch their own streaming video services, competition among them has heated up, just as their value proposition to audiences may be losing some of its luster, Deloitte noted in its latest report.
For top SVOD services, growth in North American subscribers has slowed. As they pursue global markets, and as those markets mature, they may be facing the same challenge. For consumers, getting their entertainment through the fragmented SVOD landscape requires more effort and, increasingly, nearly as much money. Over the past two years, US consumers have become increasingly frustrated when they lose content to other services, have to manage multiple subscriptions, and receive poor recommendations.
These conditions lead to churn: when people cancel, or both add and cancel, a paid SVOD service. According to Deloitte, in the United States, the average churn rate has remained consistent since 2020 at about 37% across all paid SVOD services. However, that churn for a given service might be significantly lower than the overall average. In the United Kingdom, Germany, Brazil, and Japan, the overall churn rate is closer to 30%.
People are attracted to SVOD by the content, but they often leave due to cost. Generation Z consumers are especially sensitive to services being too expensive. It costs money to acquire subscribers, so losing them too quickly can hamper providers’ ability to recoup their acquisition costs. However, cancelling a service does not mean they will not return: one-quarter of US consumers have cancelled a streaming video service in the past 12 months and resubscribed to the same service, with younger generations significantly more likely to return. In the United Kingdom, Germany, Brazil, and Japan, around 22% overall have churned and returned. Once again, the behavior is stronger among younger generations.
● HOW CAN SVOD PROVIDERS KEEP SUBSCRIBERS AROUND?
Deloitte remarks that, in order to retain more subscribers, SVOD providers are exploring ways to shift the value proposition in their favor. Offering flexible pricing options could be the most direct path. Among consumers in all five countries surveyed in its last study, options that allowed people to watch ads in exchange for lower costs —or at no cost— are the most popular. Ad-supported tiers could attract more cost-conscious subscribers. And even when there are lulls in engaging content, subscribers may not cancel their subscription if the cost is low enough.
Streaming services can also use gated content to offer consumers pricing tiers. Some companies are experimenting with offering premium access to everything at a higher price and cheaper options for less content. Deloitte’s global study found that many respondents thinking of cancelling a paid SVOD service would likely keep their subscriptions if they could get a discount. Some would be willing to watch more ads, or less content, or wait 45 days to watch a new release.
Bundles and perks can also support subscriber retention. If US respondents were thinking about cancelling a SVOD service, 37% said that access to first-run movies would convince them to stay, and 34% would stay if a loyalty program were included. Among Gen Zs and Millennials, about 51% would stay if their subscription included a gaming or music service or another SVOD service.
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