Americans have rediscovered their love for binge watching TV this year, which is causing all sorts of turmoil for streaming services. According to research firm Parks Associates, the churn rate - how many people cancel their subscriptions - rose to 41% during the first quarter of 2020 from 35% in the same period of 2019.
vMVPDs (virtual multichannel video programming distributors), which include services such as Hulu + Live TV, YouTube TV, AT&T TV Now, Fubo TV and Sling TV, have seen a lot of churn this year, in particular. Leichtman Research Group, Inc. (LRG) reports that while they gained 80,000 subscribers in the second quarter of 2019, they lost 24,000 subscribers in the second quarter of 2020. Performance really varied across different providers. Hulu + Live TV added 100,000 subscribers, but Sling TV and AT&T TV Now lost 56,000 and 68,000 subscribers, respectively.
So, what’s going on in the streaming world?
The Nature of the Churn
Generally speaking, the highest rates of churn this year have been for vMVPDs. Several factors contribute to this: they tend to cost more than OTT opponents such as Netflix, they tend to be very similar to one another and offer no especially unique experiences, and there’s usually no fee for cancelling service since contracts are month-to-month.
On the other hand, more established services such as Netflix, Amazon Prime Video and Hulu have been around for much longer and are deemed to be more essential. If consumers are considering dropping a service, they’re much more likely to choose YouTube TV than Netflix. In fact, these foundational platforms have been performing quite well all things considered. Netflix even gained nearly 16 million new users in the first three months of 2020 (almost double the number it gained in the final months of 2019).
Is All This Churn a Bad Thing?
The higher than normal amount of churn for streaming services shouldn’t be seen as people abandoning our binge watching pastime. It’s more of a gauge of interest. This year, more consumers have been experimenting with streaming services while they’re stuck at home. More than two out of every five households signed up for a streaming service free trial since the coronavirus pandemic began, and 8% of households have tried four or more platforms, according to Parks Associates.
We’ve also seen several new players enter the streaming wars in 2020, including Disney+, Peacock, HBO Max, Apple TV+ and Quibi (at least we’re pretty sure that’s what Quibi is supposed to be used for). So, users have a buffet of options to test out before they land on the services they like the most.
The Ward Group+
OTT/vMVPD advertising is like the Oregon Trail - maybe nothing will happen if you don’t have a proper guide, but you’ll be significantly more successful with one. Brands have a big opportunity right now to not only reach people who are consuming more content than ever, but also to reach users who have never used streaming services until now.
Our media stewards can be your guides into this complex and ever-changing advertising channel. With careful analysis and smart targeting strategies, we will help you find your audience wherever they may be streaming. Contact The Ward Group today to get started.