One of the biggest concerns for streaming video platforms and their investors is the prospect of churn -- or viewers canceling their subscriptions and moving on. The height of the pandemic resulted in unprecedented adoption of in-home entertainment options and direct-to-consumer programming. Since then, however, viewers returning to their normal, everyday activities are abandoning their paid subscription platforms in record numbers.
Given the growing competition in the streaming video space and an increasingly uncertain economy, a recent survey of streaming subscribers helps to shed light on what streaming subscriptions consumers will dump first and which will be the last to go.
Making the cut
A survey of British households concluded that viewers are canceling streaming video subscriptions at a record clip to start off this year, according to data compiled by analytics group Kantar. The research noted that inflation has climbed to 30-year highs in recent months, causing consumers in the United Kingdom (U.K.) to reassess their budgeting priorities.
U.K. viewers canceled 1.5 million streaming video subscriptions during the first quarter, up 25% year over year and up 44% sequentially. The highest level of respondents ever (38%) attributed their decision to "money saving." This came as consumers faced higher costs for everything from food and clothing to energy bills.
Like their U.S. counterparts, British households are dealing with rates of inflation not experienced in decades, but when it came to ditching their paid programming, not all streamers were created equal. As consumers began to prioritize which streaming services provided the least value, Disney's (DIS 0.29%) Disney+ and Apple's (AAPL 0.15%) Apple TV+ were among the first to go.
It's widely acknowledged that these more recent arrivals to the streaming wars have relatively limited catalogs of content compared to some of their larger rivals, which might account for the higher rate of cancellations. Some investors had theorized that the focus on higher-quality content by Apple and Disney might insulate them from the defections, but that turned out not to be the case.
The services with the greatest staying power were Netflix (NFLX -0.33%) and Amazon's (AMZN) Prime Video. Given the vast libraries of content boasted by the two streaming giants, this suggests that when times get tough, audiences may be looking for deeper, more robust programming libraries.
The report noted, however, that there were increased churn rates across the board. While it was mum on exactly how many paying customers canceled their subscriptions for each of the services, it noted there was a "clear difference" in cancellations between the top tier streamers, noting that Netflix and Amazon Prime would be "the last to go when households are forced to prioritize spend."
The research revealed that Reacher, a thriller on Amazon Prime, was the most-watched program during the first three months of 2022, followed by Netflix titles Ozark and Inventing Anna. The data seems to confirm that a streaming platform with an extensive library has a clear advantage over a service with limited offerings, providing ballast against the effects of churn.
Good news for Netflix?
The news comes at a critical juncture for industry leader Netflix. The streaming pioneer recently reported its first-quarter results, which included its first loss of subscribers in more than a decade. To be fair, if not for the company's strategic decision to withdraw its business from Russia, its subscriber numbers would have actually increased. That said, management suggested there could be more pain in store, forecasting a decline of 2 million additional subscribers in the second quarter.
There's always the chance that Netflix was being conservative in its guidance. Based on the results of the survey, when consumers are considering cutting back, Netflix could have more staying power than most of its streaming rivals.
Given the events of last week, that's a welcome bit of good news for Netflix investors.