Analyzing Streaming’s ‘Explosion of Growth’ in 2021, Maturation of Premium Subscription Services
Antenna’s 2021 “The Year in Streaming Report” focuses on one common theme: growth. And when they say growth, they really mean it.
The seven trends at play in the report range from the rise of new streaming services and an overall explosion of growth to shifting distribution strategies, user acquisition by programming, the increasing popularity of free trials and promotions, ad-supported growth, volatility, and managing churn.
Premium Subscription Video On-Demand (SVOD), in particular, hit its growth spurt in 2021, maturing significantly out of the 2020 pandemic lockdowns. This portion of the streaming world includes services like Netflix, Apple TV+, and Disney+ which allow users to stream on-demand content for a monthly or annual fee, but does not include any life streaming options. At the end of 2020, the category grew from 152.6M “Antenna-Covered Subscriptions” (we will cover them all here) to 194.8M by the end of 2021, +26.7% YoY and +7.0% QoQ.
Trend 1: The True Era of Advancement
2019 has nothing on 2021 when it comes to the growth of Premium SVOD. This past year saw +57% net subscriber additions over 2020 (and 2019), growing from +26.9M to +42.2M. Paramount+, Apple TV+, Peacock, and discovery+ were the primary drivers of that growth; the combination of these services alone accounted for 82% of net subscriber additions.
For years, the OGs Netflix and Hulu were leading the way, but with the explosive November 2019 launch of Disney+, the streaming world changed dramatically. Following its emergence, Disney+ captured 63% of net subscriber adds. Combined with acquiring primarily ownership of Hulu, this made Disney an immediate force in the industry. The two streaming services were responsible for 40% of Premium SVOD’s growth last year.
Trend 2: The Shift of Distribution Strategies
Due to the complexity of the Connected TV app ecosystem compared to its mobile equivalent, consumers have many more ways to sign up for a subscription. Consequently, SVOD services are faced with important decisions around their distribution strategies.
By the end of 2021, three major distribution approaches have emerged in the category.
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The Direct Approach: Netflix, Hulu, and Apple TV+, primarily sign-up consumers directly through their own self-managed channels (the latter, via their iTunes app store).
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App Stores: Disney+, Peacock, and HBO Max augment their direct channels with various app stores.
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Amazon Channels: Paramount+, discovery+, SHOWTIME, and STARZ utilize this method. The plethora of Amazon Channels accounts for 18.2M Subscriptions or 41% of the combined “antenna-covered subscriber base” for those services. HBO Max disappeared from Amazon Prime Video Channels in September 2021, consequently losing 4.2M Subscribers in the process.
Trend 3: User Acquisition Through Popular Programming
Like its linear TV predecessor, Premium SVOD is all about collecting the most buzzed-about hits. And what better way to attract subscribers than with football? While the Super Bowl has long been the most-watched annual event on linear television, it was also the king of streaming in 2021. Antenna found that CBS All Access (since re-launched as Paramount+) garnered over 750k sign-ups on Super Bowl Sunday, making it the biggest day of user acquisition for any service that year.
In the wake of COVID lockdowns, several media companies experimented with moving major feature films originally slated for exclusive theatrical releases to their streaming services. This included “Godzilla vs. Kong,” “Mortal Kombat,” “The Boss Baby: Family Business,” “PAW Patrol: The Movie,” “Cry Macho,” and “Halloween Kills.” Many films proved to be major drivers of user acquisition to their respective services, even if the move had a tendency to upset filmmakers.
Interestingly, more people signed up to watch the “Friends Reunion” on HBO Max and the “PAW Patrol” movie on Paramount+ than the Tokyo Summer Olympics on Peacock. All in all, Paramount+ earned the greatest growth in the category, with 26.6M sign-ups in 2021. Almost 5M of those took place around major content moments. Never underestimate the power of guys in jerseys and shoulder pads and an animated dog in a police uniform.
In addition, Peacock saw the greatest share — nearly one in four — of its 2021 sign-ups to have taken place around major content moments. The release of “Halloween Kills” in addition to the Summer Olympics, Thanksgiving events (NFL, the Macy’s Thanksgiving Day Parade, and the National Dog Show), plus upticks around moments such as “The Office” arriving on the platform, WWE events, and Premier League soccer.
Trend 4: The Popularity of Free Trials & Promotions
As the Premium SVOD category became more competitive in 2021, several services utilized free trials and promotional offers in an effort to attract new users to their platforms.
The popularity of free trials was quite consistent year-over-year, with the number of trial sign-ups increasing from 60.4M to 61.0M. However, the top-line numbers do not tell the full story, as Disney+ and HBO Max both did not offer free trials in 2021. Disney+ removed its free trial before it released “Hamilton” in July 2020, and HBO Max turned off its free trial prior to the December 2020 premiere of “Wonder Woman 1984” (aside from Hulu and YouTube TV add-ons).
The success of converting free trials into paid subscriptions improved to 68.6% in 2021 from 66.3% in 2020. Discovery+ (81.4%) and Peacock (77.9%) had the highest trial conversion rates while Starz (61.4%) was the lowest.
Promotional offers were also used to drive user acquisition. In 2021, there were 8.4M promotional price sign-ups, compared to just 3.3M the year prior. Showtime was the most prevalent discounter, attracting nearly 20% of their 2021 sign-ups at a promotional price. While promotional price sign-ups make up a small portion of acquisition in the Premium SVOD category, they were especially popular in the fourth quarter of 2021, accounting for over 13% of all new users.
Trend 5: Ad-Supported Growth
As The Streamable has stated before, consumers opted for less expensive, ad-supported subscriptions more in 2021 than in prior years.
For instance, the total ad-supported sign-ups grew +117% year-over-year, from 19.4M in 2020 to 42.2M in 2021. Ad-supported plans accounted for 32% of all Premium SVOD sign-ups in 2021, versus just 19% in 2020.
The data also indicates that the majority of subscribers to Hulu, Paramount+, and Peacock are on the ad-supported tiers of each service; Discovery+, however, has a lower proportion of subscribers on its ad-supported tier. This is due to the fact that discovery+ only charges an extra $2 per month to switch to its ad-free tier. Paramount+ and Peacock charge $5 more per month and Hulu’s ad-free plan is $6 extra per month.
HBO Max launched its ad-supported option in June 2021, and by year-end, 8% of their subscribers were on that plan.
Trend 6: Volatility
Although 2021 was quite an impressive year of growth for the Premium SVOD category, it was also a highly volatile one, with a record number of canceled subscriptions. In 2021, gross additions increased +54% YoY and +122% vs. 2019. However, cancelations also grew +52% YoY and +159% vs. 2019.
While the positive note is that consumers have shown that they are increasingly open to considering new SVOD offerings, this also means that consumers are managing their portfolio of services with more attention and canceling more frequently.
Trend 7: Managing Churn
In this more volatile market, which is becoming increasingly saturated for top players, services have begun turning their attention to churn mitigation. Antenna finds that the weighted average active monthly churn rates reached 5.2% by year-end 2021, up +2pts from 3.2% at the start of 2019.
If you take a look at August 2021 on the graph, churn increased during periods of major subscriber growth. Apple TV+ and Peacock, for instance, both experienced big upticks in the month following extended free trials converting to paid subscriptions, and the start of the Tokyo Games, respectively. The Disney+ launch in November 2019 is another great example.
In the face of a host of new competition, loyalty to Netflix was undeterred. Antenna data demonstrates that the streaming service lowered its active monthly churn rate from 2.5% at the start of 2021 to 2.2% by year’s end.
Also, bundling has been a particularly effective strategy for The Walt Disney Company. The Disney Bundle’s active monthly churn rate (2.8%) rivals that of market-leading Netflix (2.2%).
The Bottom Line
2021 was accompanied by spectacular growth, as the Premium SVOD category matured into true scale. With impending mergers (Warner-Discovery), new product launches (CNN+), and unannounced innovations ahead, 2022 is certain to be an equally dynamic year in streaming. Simply put, this is the greatest time in history to be an entertainment fan.