According to a new study, the pandemic had a lasting effect on streaming behavior and signs of subscription fatigue are starting to show. The Global Streaming Study by Simon-Kucher & Partners found that nearly two-thirds of US users have either canceled a subscription or are likely to cancel a subscription in the next 12 months.
However, nearly three-quarters of respondents would reconsider if their subscription fee was lower, even if that means including advertising. According to the study this “indicates the potential for hybrid subscription models that include ads and opens the door for a new era of streaming and advertising monetization.”
The study’s results are based on a representative survey conducted by Simon-Kucher & Partners in April and May 2022 with over 12,000 respondents from 12 countries (Australia, Brazil, China, France, Germany, India, Netherlands, Singapore, Spain, Sweden, United Kingdom, and the United States)
Users increasingly open to hybrid subscription models
When it comes to streaming fatigue there are two main drivers says the report: user’s monthly streaming bills and the number of active subscriptions.
Nearly a third (31 percent) of respondents reported finding it hard to manage the number of subscriptions they have. Among those that have already canceled a subscription, price is the most common reason– 35 percent canceled to save money, and 35 percent canceled because the price was too high.
“Streaming subscriptions are price-sensitive products. We do see customers canceling their subscriptions because they don’t have time, but in a lot of cases, they have multiple subscriptions running in parallel, and the total cost of this gets expensive,” said Lisa Jäger, Partner and Global Head of Technology, Media & Telco at Simon-Kucher & Partners.
The news that Netflix is making a move to launch a lower-priced, ad-supported option appears to be an early sign addressing the shift in subscriber behavior, says the report.
“Our study confirms US Netflix subscribers display a high acceptance for a hybrid model between subscription fees and ads,” said Simon-Kucher & Partners in a release, adding that over three-quarters of Netflix users would not cancel their subscription if ads were shown.
However, 14 percent would expect no price increases for the next year and furthermore, 21 percent would expect a lower price in return for accepting ads. Streaming services need to consider if they have the right monetization model to address the dual challenges of subscription fatigue and reduced consumer spending power due to macroeconomic factors like inflation.
“Consumers are getting more conscious of how much they are spending on streaming but would rather make a trade-off for a lower priced substitute than forego the service altogether,” said Ellen Kan, Partner and Consumer Subscriptions expert at Simon-Kucher & Partners’ New York office.
“To win the retention game, companies need to get creative around having offers for more value-oriented customers. Ad-supported models -which Netflix is exploring- is just one option.”
Nick Zarb, Partner, and advertising/ad-tech expert at Simon-Kucher & Partners’ New York office added: “Streaming media with precise customer targeting can deliver extremely high ROI. Advertising budgets have long been shifting toward digital, and are now shifting toward digital video specifically, with platforms like TikTok capturing the younger segments. It will be imperative for streaming companies to offer compelling and high-value solutions to capture a share of that digital video budget or else advertising revenues may not make up for lost subscription revenues.”
To learn more about the study go here.