Consumers aren't afraid to pull the plug on a streaming service. In fact, just under 30 million streaming service cancellations happened in the first quarter of 2022 alone, reaching a new record, 12% higher than any quarter in history.
Almost every streaming service is "feeling the churn," partly because of reduced spending caused by inflationary pressure and partly because of the overwhelming amount of choices in the market.
Marketers are now tasked with retaining their current members while acquiring new ones, something proving to be uniquely challenging in 2022. While the forecast looks stormy, it's not. A strong personalization strategy is at the core of what keeps consumers hooked and engaged; it’s when consumers feel individually recognized and valued that brand-customer relationships deepen and long-term loyalty can flourish.
Churn isn’t going anywhere
The increase in churn rates is partly tied to acquisition tactics used during the COVID-19 pandemic that drove the initial surge in subscribers and record-breaking growth. At the tail end of the pandemic, that growth has slowed, and retention rates are declining. Globally, consumers will drop at least one streaming service in 2022, signaling a 30% churn rate. To put that into perspective, that’s 150M customers canceling a service this year, equating to almost half of the US population.
But the big question here is, why are subscribers canceling in the first place? One of the culprits behind high churn rates today is subscription stacking—when customers use several services simultaneously. Stacking can get expensive, which causes consumers to seek out the lowest prices. Since inflationary pressures will only increase the number of cost-conscious consumers, supplementing viewing options with less expensive or ad-supported services can help retain those penny-pinching customers and even attract new audiences with a cheaper deal.
The landscape seems bleak, but it's not all doom and gloom. Consumers may be quick to cancel a subscription, but they're also willing to leave the door open to "churn and return," rejoining once content re-piques their interest. For marketers, ramping up investments in retention and win-back initiatives will be crucial to avoid losing overall subscribers. Daily viewers are 90% more likely to be retained than occasional viewers, so it’s up to the marketers to lean on personalization that delivers the tailored, curated experiences brand loyalists expect while turning occasional viewers into habitual streamers.
Competition is getting tougher
However, with the number of streaming services going up, so does market saturation. Several networks and streaming services are consolidating and clawing back content from competing services while investing heavily in exclusive original content to attract new subscribers.
But even consolidation cannot save brands from churn risk as competition increases. According to Business Insider, 64% of consumers note that they would downgrade or cancel a service to pick up another, given their non-committal, monthly payment design. Currently, the average US consumer owns five streaming services, but 52% of consumers felt that four or more streaming services were too many; it's no wonder we see churn across the board.
The industry may be crowded, but there are ways to keep consumers' attention, portfolio diversification being one of them. Diverse ecosystems are the most stable after all. Streaming brands are now branching out into new verticals. Take industry leaders such as Netflix, Amazon, and NBC, who are now investing in new opportunities from gaming to live shopping. Localization is also a big theme across streaming services as brands look to expand globally and capture less saturated market share.
Churn ends when personalization begins
Despite growing churn rates and booming competition, the biggest differentiator for streaming services will not be just their content, but their personalization strategy. The average American is streaming 8 hours of digital content daily, meaning that if individuals are willing to invest their time and money, a one-to-one experience is expected in return.
Since no two viewers are the same, marketing messages shouldn’t be either. By prioritizing tailored, 1:1 content, streaming brands are more likely to deepen relationships with consumers that are harder to walk away from. With 68% of customers noting that they’re more likely to stay loyal to brands that build personal relationships with them—personalization needs to be at the heart of every action.
Your viewers crave relevancy. They want to see communications that put their needs first and foremost, such as personalized messages notifying them of new episodes based on their previously viewed content (25%), reminders of what’s on their watch list (24%), and visibility into the content that’s trending (25%).
Consumers are willing to put their time and money into streaming services that provide value and entertainment. Seeing their personal preferences be brought to life in a way that makes them feel like the main character is the key to offsetting churn. Marketers have the data, now’s the time to deliver the meaningful, 1:1 streaming experiences consumers expect.
To learn more about the challenges streaming services face going into 2023 and strategies to support retention, download Movable Ink’s eBook Streaming Services: How to Stay Agile in an Unpredictable World.
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