Premium Streamers Scramble for Fresh Strategies to Retain Fickle Subscribers

Streaming services are scrambling for new strategies to retain their existing subscribers in a highly crowded domestic market. The level of churn among premium streaming services like Netflix, HBO Max, and Disney+ has accelerated.

Among the top ten premium streamers, there were more than 32 million cancellations between June and September 2022, compared to 28 million in the year’s first half. All signs point to this trend gaining momentum this winter and into 2023.

Content Distribution is More Transformative Than Ever Despite Hopes of a Return to Normalcy

The streaming landscape continues to transform, leaving most consumers whiplashed with all the diverging subscription models and options from a growing list of providers. Instead of favoring a one-size-fits-all model for its global subscribers, 2022 was the year that broke Netflix’s longstanding resolve against an advertising tier.

Fueled by a surplus of cheap debt for decades, Netflix is finally putting the brakes on its content spending, as well as enforcing password-sharing restrictions and downsizing several departments. The company was seemingly shocked after losing subscribers in back-to-back quarters in the year’s first half– a first for the king of streaming.

The rate of streaming subscriber additions in the first half of 2022 compared to the same period in 2021 was down a staggering 45%. The industry hopes this result is just an abnormality, but all signs point to a cancellation trend that is just getting underway.

Disney Streaming and the services offered by the newly created Warner Bros. Discovery (WBD) have assured shareholders that, unlike Netflix, which has never much cared about profitability since its investors seemed indifferent, their streaming division would be profitable by 2024. With slowdowns in progress, these claims are overly optimistic as economic headwinds start to blow.

Detecting these challenges, Netflix and Disney reverse course and are now embracing advertising. In another reversal, HBO Max is available again on Amazon Prime Channels after a year hiatus stemming from a decision to pull the streaming service made under the incomparable management of AT&T.

Notwithstanding these changes, all major studios are exploring various options to monetize their libraries through paid ad-supported service (AVOD) and free ad-supported service (FAST).

Worldwide Film & Television Distribution Intelligence

Get unparalleled access to market intelligence reports that draw on financial data and insights from dozens of content distribution deals worldwide between key industry participants, including — Distributors, Producers, Broadcasters, MPVDs, Pay Television Providers, and Streaming Exhibitors.

Film and Series distribution rates and terms deriving from dozens of agreements for rights to transmit films and episodic television via PayTV and SVOD.

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Licensing Terms & Included Programs:

Pay-1 & SVOD Rate Cards for Motion Pictures and Series Exhibited Worldwide in Multiple Availability Windows

  • Motion Pictures: Pay-1, First Run, Second Window Features, Recent Library Features (Tiers AAA,A,B,C), Library Features (Tiers AAA,A,B,C), Current and Premium Made-For-TV Films and Direct-To-Video Films, covering many license periods over the last decade
  • Episodic TV: Current, Premium, Premium Catalog (1HR & 1/2HR), Catalog Series (1HR & 1/2HR), and Catalog Miniseries + Case Studies on Current Mega Hit, Catalog Mega Hit, and Premium Catalog, covering many licensing terms from 2012-2024
  • Because most-favored-nation rates operate in practice, the rates and terms apply to a diverse range of content and distributors worldwide in multiple availability windows.

Netflix’s Subscribers Remain Loyal Despite Growing Churn Among Subscribers

Since there is an ever-growing number of streaming options available, many subscribers rotate between several platforms often to take advantage of a smash hit before canceling, e.g., Apple’s Ted Lasso and HBO Max’s Dune.

In the second half of 2021, after the season of Ted Lasso finished, nearly 20% of Apple TV+ subscribers planned to cancel. Apple’s opaque reporting makes it impossible to substantiate these claims.

Likewise, over 7% of HBO Max’s subscribers planned to leave after watching Dune, which is more substantial considering the amount of content available on HBO Max compared to Apple TV+.

According to recent surveys, nearly half of all US subscribers rotate between multiple SVOD services several times a year. However, Netflix is an anomaly to this trend, as its subscribers remained loyal while switching between its competitors. However, this trend recently reversed in September 2022 when 6% of Netflix’s subscriber base churned, resulting in a continued loss of domestic market share.

Subscribers seemingly crave multiple subscriptions options, as all three top domestic services that offer numerous tiers (AVOD & FAST) saw increases in household penetration from quarter-to-quarter Peacock (2.7%), HBO Max (2.2%), and Hulu (2%). The Direct-to-Consumer strategy implemented by the major studios aims to attract viewers via an ad-supported pay service or free ad-supported service and then upgrade them to premium subscribers through improving user experience and content additions.

Share of New US Streaming Subscriptions

All Streaming Models: SVOD, AVOD, FAST, Digital MVPD, and Service Bundles

FilmTake Away: Multi-Tier Streaming Subscriptions Are Here to Stay

While the overall streaming market is flat-lining with mounting SVOD cancellations, paid ad-supported (AVOD) and free ad-supported (FAST) services are continuing to grow, signally continued downsizing by streaming subscribers.

However, these generalizations are not without exceptions. For example, Hulu’s SVOD service propelled Q3 2022 growth, but at Peacock, its paid AVOD service was the driver.