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Streaming services are looking for ways to stop the Great Unsubscribe

Not that long ago, streaming services seemed to be a cheaper and more convenient alternative to cable. But now, the combination of rising living costs and an excessive variety of new platforms means that millions of subscribers are opting out.

Companies are rushing to stop the Great Unsubscribe, though, and some of them, namely Netflix, have been quite successful. This streaming giant just announced it has reversed the subscriber slump and added 2.4 million subscribers from July through September – twice as much as it lost in the first half of 2022.

However, enthusiastic tweets by observers do not mean the current situation is sustainable in the longer run. Sure, Netflix's numbers are great at first glance: the company’s shares jumped 14% after it forecasted it would pick up 4.5 million customers in the fourth quarter.

But Netflix is still lagging behind HBO Max in the US on-platform movie-share department, according to leading industry analysts Parrot Analytics, while the actual share of the global market shrank from 45.8% in the third quarter of 2021 and is now sitting at 40.9%.

Finally, yes, the subscriber base is growing again after a half-year pause, but Netflix’s revenue dropped to $7.92 billion and is down from $7.97 billion in the second quarter of 2022.

Besides, inflationary pressures, especially in the US and UK, are going nowhere. As a growing number of people have no other option but to save cash, the majority of them choose to cancel digital subscriptions.

The craving to take it easy

“It’s no secret that subscription fatigue is at an all-time high. Consumers are overwhelmed with the number and cost of subscription services vying for their eyeballs and dollars. Gone are the times when the main competitor to Netflix was sleep,” Dan Goman, CEO of Ateliere Creative Technologies, a cloud-native digital media supply chain and distribution platform, told Cybernews.

Netflix’s Co-Chief Executive Officer, Reed Hastings, said just that in 2017, when he claimed that the service is competing with sleep – and winning. When people see a new show or a movie they’re dying to watch, they often stay up and binge, thus losing precious shut-eye time.

Today, sleep is still losing, but the competition is much larger. And, according to Deloitte’s Annual Digital Media Trends survey, nearly 47% of US consumers are frustrated by the growing number of subscriptions required to watch what they want.

The same poll reveals audiences have started to crave a comfortable ‘lean back’ experience – an easier, more passive way to access content without the stress caused by an overabundance of choice. In the US alone, there are currently more than 300 content-streaming websites.

Inflation is also an important factor. Another survey published by the accounting firm KPMG revealed that 20% of respondents had already canceled at least one streaming service due to inflation. And if prices keep rising at the current rate, 37% of respondents said they plan to drop one or all of their streaming subscriptions.

“Consumer viewing and spending habits have changed, COVID lockdowns are gone, and the major streaming services are increasingly focused on retention strategies and creation of new revenue streams, instead of massive subscriber expansion,” Goman says.

Is free ad-supported content the answer?

So how are the largest streamers dealing with growing concerns that the fundamentals of the digital subscription business model are off? For starters, the platforms are quite different – as are their strategies.

Netflix is hoping to add even more new consumers – and revenue – with its new $7-per-month streaming plan that also features advertising.

For some, an ad-supported tier is an obvious solution. Kantar recently found that free ad-supported video platforms, such as Peacock, IMDb TV, Tubi, and Roku, are growing – no wonder Netflix has decided to walk the same way.

To be clear, Netflix won’t be free – for now. Some analysts are increasingly claiming that free ad-supported services will start making more and more sense because the streaming giants will massively profit from commercials.

“Offerings like Advertising Video on Demand give consumers more options to access content. It also provides an alternative and complementary means for platforms to monetize their content and tap into different consumer bases,” Goman says.

“Recession fears and inflationary concerns would seem well poised to be something of a catalyst for adoption of this hybrid approach. The addition of advertising tiers will serve to reduce the corporations' perceived need to raise subscription pricing.”

Goman also thinks that the consumer tolerance for advertising will likely be higher against a challenging economic backdrop than it would be for subscription price increases.

Consumers want bundles

Lyle Solomon, a personal finance expert and Principal Attorney at Oak View Law Group, advises people to stick to one subscription if possible. Which one? According to Solomon, Disney+ might be the better choice.

“Disney's main attractions are, of course, its exclusives. Apart from Disney-owned studios such as Pixar and Walt Disney Animation Studios, Disney also owns rights to Marvel and Star Wars. This gives it massive leverage over its competitors, as Marvel and Star Wars fandom is massive,” Solomon told Cybernews.

“So even if people may try to cut down on subscriptions due to inflation, in most likelihood, they will not abandon their favorite shows or movies or characters, for that matter. This has helped Disney a lot over these inflationary times.”

Besides, Disney+ has an extensive library of content that goes back decades and includes rewatchable classics. This means that the company is well-positioned to keep viewers in its ecosystem.

Disney has also been smart in navigating the landscape and meeting users’ expectations when it comes to bundled subscriptions. Nielsen’s State of Play report found in April that 64% of US consumers want a bundled streaming option.

Earlier this year, Disney increased the price for the ESPN+ subscription but kept the cost of its bundled subscription of Disney+ stable at around $13. This way, more ESPN+ subscribers are likely to migrate to the bundle.

“Streaming bundles provide cost efficiencies, and as much as we hated the cable bundles with the 300 channels you never watch, the bundle is what made it cost-effective for families,” Goman told Cybernews.

“It may take a long time to get to the equivalent of the cable bundle for streaming, there are many challenges. But the industry is responding and taking the initial steps in that direction.”

Millions are ‘service hopping’

Amazon’s Prime Video is yet another story. The cost-to-benefit ratio works very well for the consumer: by getting Amazon Prime in the US, you get access to free delivery, exclusive access to Amazon’s Prime day sales, and Amazon Music.

Apple TV+ can afford to focus on its own original production rather than think about growth strategies – the parent company is one the largest in the world and has the cash to burn. The service is best thought of as a humble add-on to Apple’s ecosystem – although, Apple has just announced a price hike for its subscription services across the board.

What might worry the streamers is the fact that a significant chunk of consumers demonstrates no loyalty at all, and is actively ‘service hopping’ between platforms. One might subscribe to Netflix to watch the new season of The Crown but then cancel and try out The Rings of Power on Prime Video.

And in March 2022, a new Parks Associates report found that 36% of media service subscribers, roughly 32 million US households, are “service hoppers.” They switched between services and resubscribed multiple times in the previous twelve months.

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