Connect with us

Trends

Streaming video subscribers are canceling at record rates

Consumers have a plethora of choices when it comes to streaming video subscriptions these days. But neither their time nor their financial budgets can afford to stream everything available. Subscribers around the world will cancel over 150 million streaming video-on-demand subscriptions in 2022, with subscriber churn accelerating from prior years, according to analysts at Deloitte.

More than one-third of U.S. subscriptions canceled
Churn rates in the United States have climbed to about 35% over a 12-month period, the researchers at Deloitte said. That rate surged higher as big media companies including Walt Disney (NYSE:DIS), AT&T’s (NYSE:T) HBO, Discovery Communications (NASDAQ:DISCA) (NASDAQ:DISCK), and Comcast (NASDAQ:CMCSA) joined longtime market leaders Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) in the space.

Media companies launching their own streaming services means the content they used to license out to Netflix or Amazon is more often kept for themselves. It also means new original productions and lots of marketing spend to push them. In other words, content is becoming more siloed, and consumers need to manage multiple subscriptions to watch the shows they want.

That also means streaming services need to have the shows consumers want to watch. They need hits. And while data shows subscribers tend to stay subscribed after they sign up to watch a hit series, they won’t stay signed up forever unless there’s a steady stream of them.

Growing churn in the United States also puts a greater emphasis on international subscriber growth. Churn in international markets still lags well behind the rates seen in the United States, but that could rise as more competitors enter overseas markets. Expanding internationally sooner rather than later can allow big American media companies to establish a sizable user base before churn increases.

Growing the content library
Netflix is in an enviable position to spend heavily on content. With over 200 million global subscribers, the streaming giant will spend over $17 billion on content this year without taking on excess debt. It’ll likely increase that content budget in 2022, when it expects positive free cash flow.

Meanwhile, all of its streaming competitors are spending more cash on content and marketing than they bring in as they work to scale subscribers. That said, the competition is typically just a small part of a much larger media operation. Disney, for example, just announced plans to increase its content budget by $8 billion in 2022, with the bulk of that spending going toward streaming. The only reason the company is able to do so is that it has millions of cable network subscribers and park visitors.

Likewise, Amazon has seen a significant expansion in its content expenses over the last couple of years. But other competitors are being much more conservative with their content investments.

Investors in streaming should look for companies willing to leverage their nonstreaming operations to grow their nascent video-on-demand services. As more viewing time shifts from traditional television to streaming, the investment will be worthwhile.

Expanding internationally
Here, too, Netflix is a clear leader. It’s been offering its service in nearly every country around the world since early 2016. Amazon was quick to follow with an expansion of its Prime Video service into countries where it didn’t offer its full Prime free-shipping service.

Disney+ has expanded to several international markets in Europe and Latin America, but the bulk of its subscribers still come from the United States and India. Discovery gave itself a head start in India and Europe by rebranding preexisting streaming services in those markets with the launch of Discovery+, and it plans for a Latin America expansion early next year.

HBO faces a roadblock in certain markets where it has preexisting distribution agreements. Comcast is planning to use its ownership of Sky, the leading European pay-TV provider, to distribute Peacock in Europe, but it doesn’t have concrete expansion plans beyond that region.

With lower churn rates in international markets, it may be easier to grow subscribers internationally from now on. Furthermore, offering a global service opens the doors for more content spending and more varied content on the platform, translating into greater interest from consumers back in the U.S. and around the world. There are significant advantages in streaming to supporting a global subscriber base.

Investors should pay attention to global expansion plans for the companies they’re most interested in. For right now, though, Netflix is still in the most enviable position of all the streaming services and should see less impact from churn than its smaller competitors due to its massive content budget and international presence. Motley Fool

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2023.Broadcast and Cablesat

error: Content is protected !!