According to Deloitte’s Media Trends Report, at the start of 2020, consumers subscribed to an average of three paid streaming video services. Ten months later, in October 2020, consumers subscribed to an average of five services. However, while consumers have shown a large appetite for streaming content, the number of services is proliferating fast.
In this very competitive marketplace, streaming video services are spending heavily to attract new subscribers. In fact, an estimated $200 per year is spent on marketing to attract each new subscriber. To make back these costs, services must retain a new subscriber for up to 15 months. With high acquisition costs and little friction to cancel, streaming video services must work diligently and strategically to retain subscribers.
Choice and churn
Deloitte’s data shows that even while the number of subscriptions increase, consumers now cancel services more often. Twelve months ago, one in five respondents (20%) report canceling a streaming service. However, in October 2020, close to half of the respondents (46%) report canceling at least one service.
Further, in May 2020, 9% report that they both added and canceled a streaming video service. By October 2020, slightly more than one-third of consumers (34%) state they both added and cancelled a service. Unfortunately, less than half of all subscribers see their streaming video subscriptions as a must-have.
Engagement in this new era
Investing in content is expensive and necessary to differentiate a streaming video brand. More than half of respondents (55%) report they subscribe to a streaming video service because it includes a broad range of television shows and movies. Forty-three percent subscribe because the service offers both original and exclusive content and 27% subscribe to a new service because it offers ad-free viewing.
While content is king, consumers who subscribe for a particular show may not stay long enough to find another. In fact, 62% of respondents who sign-up to watch a specific show, then cancelled once they finish watching it. Obviously, engaging and retaining subscribers is critical to business. Respondents report the following offers help stop them from canceling a service:
- 28% a reduced cost, ad-supported tier of the service.
- 27% exclusive new movies or new series.
- 23% in-home viewing of a theatrical release the same days it’s released in theaters.
- 22% multiple people under the same account can watch at the same time.
- 18% watch movies with others on social platforms.
- 18% discounts on related merchandize and entertainment.
- 17% download and watch content offline.
Subscription (and ad) appeal
The impact of Covid-19 on household finances also appears to play a role in determining which services consumers hold onto for their entertainment. Subscriptions to at least one-ad supported service increased from 40% in January 2020 to 60% in October 2020. Individuals are willing to watch ads in exchange for a reduction in the subscription cost. On average, respondents report seven minutes of ads per hour is reasonable.
Streaming video services need to continually deliver value to their subscribers. In the subscription business, it is important to think beyond payments as a touchpoint. Understanding and getting closer to the consumer is the holy grail. The good news is that first-party audience data can provide highly useful insights.
Leveraging insights to tailor programs and memberships for different type of viewers can also offer a more personalized user experience. This way, audience fragments become super-served niches and loyal viewers become VIP members — who will stick around and pay off in the long term.