As Streaming Churn Rates Continuing to Rise, How Streamers Can Combat Customer Defections
The streaming marketplace is as crowded as it has ever been, and users are spoiled for choice. That partly explains why subscribers are canceling streaming services at a higher rate than any quarter during the last three years, according to a survey from television research firm Antenna.
In all, Antenna found that 32 million U.S. customers canceled a streaming service in the third quarter of 2022. That’s a significant expansion over quarters one and two, in which 28 million customers unsubscribed from a service. The numbers show that while inflation may have eased somewhat in the U.S., consumers are still willing to trim their entertainment budgets for quick savings.
When examining a specific service, the data from Antenna becomes even more insightful. Antenna previously documented a meaningful uptick in Netflix churn following its last price increase in January 2022, when it saw 3.6 million cancelations. In fact, Netflix’s average monthly churn rate was up again in Q3, to 3.5% from 3.4% in Q2, and 2.0% in 2021.
So what are companies doing to combat these rising cancelation rates? Netflix is likely counting the days until it has enough data to determine whether its new ad-supported video-on-demand (AVOD) tier is helping keep customers loyal. Disney+ is also due to launch an AVOD subscription plan on Dec. 8, hoping that a lower price point will convince customers that its service is a good enough value to weather any budgetary storm.
Other streamers are taking a different tack to try and reduce churn rates. HBO Max, which already has an AVOD price tier, is exploring the launch of a free ad-supported TV (FAST) channel which will carry legacy shows to compliment the combined HBO Max-discovery+ service that is due to roll out in 2023.
FAST channels are an excellent way for streaming services to offer more content without having to raise subscription prices and combat churn. Of the reasons customers gave for canceling a service in 2022, the number one response was that a user had finished watching the content they wanted on that platform. Offering more content free will give streamers like HBO Max the opportunity to keep customers in the fold, while still monetizing their viewing thanks to ad revenues.
Whether AVOD tiers or FAST channels will make a meaningful dent in churn rates remains to be seen. But with the streaming market now at over 300 individual services, churn won’t see a meaningful decline until streaming platforms determine the best way of keeping their customers around.