Why 2022 May Be a Very Bad Year for Paid Streaming Services


 

We are now at the height of the streaming wars, with Netflix, Amazon Prime Video, Hulu, Apple TV, Peacock, Crunchy Roll, Disney+, and HBO Max the current top services. As prominent streaming services expand globally and national media corporations launch their own domestic streaming services, consumers have more options than ever before, but churn is also increasing as a result. The amount of customers who stop paying for any subscription service is known as “churn”. In a recent study by Deloitte Global, at least 150 million paying subscribers are likely to cancel their streaming (SVOD) services worldwide in 2022, and they expect churn rates of around 30% per market, with the U.S. as high as 38%.

 

David Ng explained this finding over at Breitbart.

Hollywood is staking its future on digital streaming entertainment, but now that future looks increasingly like its being built on shifting sands. A new study predicts more than 150 million people will cancel a paid streaming subscription, like Netflix or Disney+, in the coming year, signaling greater financial uncertainty for studios looking to grow their subscriber bases.

 

Top dog Netflix had unexpected stagnation in 2019, and lost subscribers in North America in the second quarter of this year, a sign of how competitive the video streaming market has become. The company reported that it lost 430,000 subscribers in the U.S. and Canada, shrinking its subscriber base in those countries to 73.95 million. And now, in the third quarter of 2021, the proportion of US households who have a video subscription has dropped to 85% (down 1 percentage point quarter on quarter), meaning there are now 109 million households overall with subscriptions.

 

 

So what does 2022 look like? Although Deloitte Global contends that more subscriptions will be added than cancelled next year, the high acquisition costs and market friction are poor news for the major streaming companies. They also expect that as more services, options, and information become available to consumers, acquisition costs would grow even more.

 

Deloitte concedes that American consumers have the highest churn rate, in large part due to the maturity of the U.S. streaming market, which continues to offer ever more streaming options. And as a result, customers can “become overwhelmed by managing and paying for all those subscriptions, and they have become more sensitive to their cost. [And]  These conditions can drive customers to cancel subscriptions and/or seek less expensive ad-supported offerings.”

 

 

Meanwhile, any consumers are flocking to free alternatives as a result of the growing number of subscription options. Ad-supported video is growing popularity as streaming services evolve. Consumers can benefit from AVOD in a variety of ways. The Roku Channel, Tubi, and Pluto TV, for example, are gaining popularity not only because of their large amount of content but also because of their low cost ($0). Regardless of your age or financial situation, free services are an appealing bargain.

 

And despite the overall drop in streaming, “stacking” is gaining popularity among those who hang on to paid services. The average user currently has 4.2 streaming subscriptions in total, up from 3.8 in Q2 2021. Subscribers to more mature platforms like Netflix, Amazon Prime Video, and Hulu are less likely to stack subscriptions, and stacking growth among these consumers is slower than the overall market. Competing with mature platforms may be more difficult for emerging rivals entering the video streaming space than competing with other maturing platforms.

 

As always, trending content will typically keep the leaders on top, and those with multiple accounts tend to be more easily retained because they’re invested and all-in. But overall, it looks like the number of new subscribers may have peaked.


Karina Smitt

I'm not as much of a "CoMiCs NeEd MoAr DiVeRsItY & iNcLuSiOn" advocate as my girlfriend often is, but we both love funny books, crispy bacon, straight bourbon and hip hop. Add yet, we never vote the same, so we cancel each other out... and that works perfectly in my book!

JUST KEEPING THE LIGHTS ON