Study: UK streaming market shrinks

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The number of UK households subscribing to at least one video streaming service has plummeted as the cost of living crisis has led some UK households (particularly younger households) to shift their focus away from entertainment, according to Kantar. Entertainment on demand study. Some 16.9 million, or 58% of households, now have at least one paid subscription, down 215,000 quarter-on-quarter.

The study also identified the following dynamics within the VoD market for the three months to March 2022:

  • 51 million SVoD services were canceled by households in Q1’22, compared to 1.04 million the previous quarter and 1.20 million a year ago. Over half a million cancellations attributed to ‘saving money’
  • Streaming service penetration for GenZ households fell slightly for the first time, to 74.6% from 75.4% in Q1 2020 and a peak of 75.8% in Q4 2021
  • Only 3.0% of households in Britain took up a new video streaming subscription in the first quarter of 2022, compared to 4.2% in the same period in 2021
  • The proportion of consumers planning to cancel SVoD services and citing ‘wanting to save money’ as the main reason rose to its highest level ever at 38%, up from 29% in Q4’21
  • Disney+ quarterly churn tripled quarter over quarter to 12% in Q1’22
  • Amazon Prime Videos Reach was the most popular SVoD title in Q1’22, followed by ozark and Invent Anna by Netflix

Inflation bites

With UK inflation hitting 6% in the first quarter of 2022 and further increases in energy and fuel costs likely, Kantar has evidence that households are starting to seriously prioritize where and how their disposable income is spent. . The overall household penetration rate for the UK streaming market fell for only the second time.

Churn rates increased almost everywhere, but there was a clear difference in the scale of attrition outside of Netflix and Amazon. Netflix and Amazon can be seen as “hygiene” subscriptions for Brits; the last to go when households are forced to prioritize their spending. Disney, NOW, Discovery+ and BritBox all saw significant increases in churn rates quarter over quarter.

Reasons for churn also indicate that inflation is at the heart of consumers’ concerns, with 1/3 of those who canceled an SVoD service in the quarter saying it was “to save money”, a jump from 28% in the previous quarter. Additionally, planned cancellations of SVoD services are increasing, with “wanting to save money” being the driving factor accounting for 38% of planned cancellations in the second quarter. This is reinforced by the lowest new subscriber rate ever – only 3.0% of households took up a new SVoD subscription during the quarter, compared to 4.2% a year earlier.

“With many streaming services experiencing significant revenue growth at the height of Covid, this moment will be sobering,” commented Dominic Sunnebo, Global Insight Director, Kantar, Worldpanel Division. “Evidence from these results suggests that UK households are now proactively looking for ways to save, and the SVoD market is already seeing the effects. Therefore, it is now more essential than ever that SVoD providers demonstrate consumers how indispensable their services are at home in what has become a highly competitive market.New marketing and content acquisition strategies will likely need to be deployed to support this and prevent further churn.

Importance of subscription

As the number of players in the UK SVoD market increases, the relative importance of each subscription in a household becomes crucial. UK households subscribing to streaming services now subscribe to an average of 2.4 services, up 0.1 from the fourth quarter of last year. In times of financial uncertainty, services must be indispensable in the minds of subscribers. Households that subscribe to the Netflix streaming service are consistently ranked #1 in importance, regardless of the platform they face. For the likes of Disney+, the implications are significant, as it must focus on replacing existing services that households subscribe to, without always being an additional add-on.

AppleTV+ on the momentum of the Oscars

Drivers of consumers subscribing to new SVoD services continue to focus on specific shows/movies – in just 12 months, the number of consumers reporting they have subscribed to a service to watch a specific show/movie has increased from 30% to 36% . Prime Video remained No. 1 in share of new subscribers during the first quarter of 2022, but saw its share drop significantly during the holiday quarter as Netflix fought back after a tough fourth quarter. Prime Video can however celebrate the success of its TV series, Reachaccording to Lee Child Jack Reach novels, which was the most popular streaming show across Britain in Q1 22, slightly ahead of Ozark in second place and Inventing Anna in third. by Disney Boba Fett’s Book took fourth place. AppleTV+ also achieved its highest ever share of new subscribers in the UK, up to 9.2%, with momentum likely to continue following its recent Oscar success.

“Content accolades offer enormous value to SVoD services, demonstrating that their original production investments and creative abilities can eclipse Hollywood,” Sunnebo suggests. “While Netflix has won numerous awards for its movies, Apple was first at the Oscars, which could drive growth for Apple TV+ as consumers sign up for a subscription to find out what made CODA so impressive.”

Netflix Ads?

Netflix’s financial reports for the fourth quarter of 2021 highlighted future forecasts that were lower than many analysts had expected and resulted in significant downward pressure on its share price. Discussions quickly turned to what Netflix should do next in markets where it is nearing peak penetration. Advertising is an obvious avenue to drive revenue growth, but Netflix has strictly refrained from it. However, Netflix chief financial officer Spencer Neumann added fuel to the fire when he said in March “it’s not like we have a religion against advertising.” Kantar Entertainment on demand data across Britain shows Netflix subscribers’ attitudes towards advertising are softening, with 44% now saying they don’t mind seeing on streaming services if it makes them cheaper, a significant increase from 38% at the same time in 2021.

“As SVoD providers explore different strategies to maintain revenue, advertising might be a logical option,” says Sunnebo. “In the US, NBCUniversal’s Peacock service has had success with a tiered model that incorporates advertising at lower cost to consumers. As households tighten their purse strings, many could potentially welcome a similar model from their favorite SVoD provider in Britain.

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