Streaming services in the United States face a significant challenge as user cancellations soar, prompting platforms like Hulu, Netflix, and others to devise new strategies to retain their customer base, The Wall Street Journal tells us in a recent report.
The surge in cancellations, which has seen a sharp rise to 6.3% in November from 5.1% just a year earlier, reflects a growing trend of consumer fickleness in the highly competitive streaming market.
More Users Hitting the Cancel Button
According to data from subscription analytics provider Antenna, about one-quarter of US subscribers have cancelled at least three major streaming services over the past two years.
This marks a stark increase from the 15% cancellation rate observed two years ago, signalling a shifting landscape where subscribers are becoming increasingly selective about their entertainment choices.
The cause behind this surge in cancellations seems multifaceted. Factors such as rising subscription costs prompt customers to question the value of their home entertainment selections.
One customer speaking with WSJ shared they had considered cancelling Hulu but opted to retain it after being offered six months of its ad-supported service at a heavily discounted rate of $2.99 per month, significantly lower than the standard $7.99 monthly fee.
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Keeping the Streaming Industry Afloat with Discounts
Some customers have reportedly downsized their streaming plans to manage costs, transitioning from premium to standard plans, thus limiting simultaneous device usage and lowering viewing resolution. This shift in consumer behaviour has been notable, especially given Netflix's historically low customer defect rate.
Understanding the importance of customer retention, streaming platforms are introducing various tactics to entice subscribers. Lower-cost ad-supported tiers, bundled deals with competitors, and offering discounts or free service months have become commonplace strategies.
For instance, Verizon has recently rolled out a bundle comprising ad-supported tiers of Netflix and Max for approximately $10 per month, significantly below the regular $17 cost.
The significance of ad-supported plans has grown considerably. Disney+ and Netflix witnessed a substantial increase in customers opting for ad-supported tiers, especially during promotional events like Black Friday.
These plans are seen as a win-win, generating revenue from subscriptions and advertising and addressing the needs of price-sensitive customers.
Despite the surge in cancellations, there's a promising trend of customers returning to streaming services after cancelling. Antenna reports that approximately one in four individuals resubscribed within four months of cancelling, with half doing so within two years.
What Industry Leaders Think
Industry leaders emphasize the effectiveness of bundling in retaining customers. Warner Bros. Discovery CEO David Zaslav views bundling as integral to the business's future and enhancing customer experience.
Disney, too, believes that customers are less likely to cancel their subscriptions when opting for bundled services like Disney+, ESPN+, and Hulu.
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