Annual Streaming Plans: Users Save Money, Streamers Reduce Churn - Why Aren’t They Advertised?
When Disney+ launched in 2019, it offered a unique deal for its earliest subscribers: 3 years for $153.66. That locked in subscribers for less than $4.27/month. At the time, it was something of a gamble. There would be no way of knowing what the service would offer or whether users would enjoy it for a full three years. But that offer did two important things for Disney: it provided a reliable base of revenue to start and it completely eliminated churn (on paper, anyway).
We haven’t seen another offer like that in the streaming world since, and we rarely hear about the annual plans that do exist. Why is that?
Paramount+, Hulu, and HBO Max allow users to save 16% if they pay for a full year upfront. The discount for a year of Disney+ is 20%. Netflix does not offer an annual plan. Prime Video also doesn’t offer an annual plan, though most people sign up for the $139 Amazon Prime membership that includes Prime Video for a year.
Occasionally, a service may offer a screaming deal on an annual plan. As a Black Friday deal, Hulu offered 12 months at $0.99/month for its ad-supported plan. Notably, that amount is billed monthly.
While some services offer an annual plan, why are they not promoted more often? It may boil down to sticker shock. While $7.99/month may seem reasonable, $79.99/year seems like a weightier decision, even though the monthly cost is superior.
From a consumer standpoint, economics alone can’t always make the case. As situations change throughout the year, you may find yourself with less time to stream. In the case of a service like the upcoming Bally Sports App, no one would pay for an annual subscription if the only live sport available is one baseball team. In order for an annual subscription to make sense, it needs to be used regularly throughout the year. For parents of small children, that’s where that Disney+ or Paramount+ deal makes sense.
With services like Netflix or Hulu, an annual plan is perhaps less attractive. As the content slate rises and falls, there are definite drawbacks to paying for a year upfront. It may be easier to join when the next edition of “Squid Game” or “Only Murders in the Building” arrives, then snuff the subscription after the season ends.
That vulnerability explains why so many streaming services are now releasing one episode per week with their top titles. With an 8-10 episode show, streamers can squeeze up to three months out of a subscriber. If you look at the history of Disney+ releases, this is absolutely their strategy, aiming to have a marquee Star Wars or Marvel show running at all times throughout the year. Netflix has pivoted away from their binge-only model in response.
While an annual plan reduces churn, streamers make more money on the monthly plans, and most companies are content to risk churn for the short-term revenue. After all, many of us forget we’re paying that monthly cost unless we’re doing a personal budget review. While Netflix suffered a short term stumble with its recent price hike, there’s good reason to expect that the majority of subscribers who stayed have no plans to leave.
If you’re the kind of person who loves streaming, it does make sense to grab an annual plan if you can afford the upfront cost. At the end of the year, you’ll have more cash leftover than if you paid monthly. The discount may be worth it, even if you have a few months where you’re too busy to watch anything.