Churn Is The Streaming Business Buzzword You Should Know For 2021

In December, the launch of Wolfwalkers on Apple TV+ sparked a minor debate on social media. Apple’s young streamer has few prestige animated titles, and some who wanted to watch Cartoon Saloon’s new feature complained about having to sign up to a service that otherwise doesn’t cater to their tastes. Others offered a solution: they could sign up for a free trial of Apple TV+, watch Wolfwalkers, then cancel their subscription without paying a dime.

In a nutshell, that is the kind of scenario with which streaming companies increasingly have to contend, according to a new report by Deloitte. The consultancy firm argues that the era of parallel growth for streamers may be ending (in the U.S.). Instead, the industry is seeing increasing “churn” — jargon for customers’ tendency to stop using a service. Consumers are becoming more fickle.

The report draws on three surveys conducted by Deloitte in 2020. These show that, between January and October, the average American who subscribes to a streaming service increased their number of paid subscriptions from three to five. In the January survey, however, only 20% of respondents had dropped a subscription in the previous 12 months; in October, 46% had done so in the previous six months. In short, people are changing their services more fluidly than before.

Of those who have cut a service in the pandemic, 62% had signed up to watch a specific show and then canceled afterwards. A full 43% canceled the same day they decided they no longer wanted the service. The Wolfwalkers scenario, it turns out, is quite common.

This clearly poses a problem for the companies, who spend huge sums on producing and acquiring content, then on advertising. Deloitte found that they can spend up to $200 per year on marketing to acquire one subscriber. They have to retain the subscriber for up to 15 months to recoup that cost. If the subscriber leaves after watching one show, that’s a big loss.

Consumers too are under financial pressure: Covid has hit household incomes (although Deloitte found that this burden has decreased over the course of the pandemic). This pressure may be a factor behind the churn. It may also help explain the growing popularity of free ad-supported streaming services, such as ViacomCBS’s Pluto TV and The Roku Channel.

The use of free streamers grew rapidly in 2020. In January, 40% of consumers subscribed to at least one; by October, 60% did. They have more and more options: last year saw the high-profile launch of NBCUniversal’s Peacock, which comes with a free tier. The report notes that these services can offer far less advertising per hour than pay-tv channels, making them more appealing to viewers.

Fees are becoming an all-important factor to consumers as they juggle multiple subscriptions. When they were asked what would keep them from canceling a paid service, the most common response was cost: 28% of respondents “said they would stay if they could switch to a reduced cost, ad-supported tier of the service.”

Content remains key, too. To the same question, 27% answered that they “would stay to see an exclusive new movie or series they were interested in,” and 23% said they’d want the option to “purchase new movie releases the same day they are released to theaters.”

Of course, the major streamers continue to devote vast huge resources to original programming. Netflix just unveiled a 2021 slate that promises a new film every week; Disney presented some 80 pieces of exclusive Disney+ content at its recent Investor Day; and HBO Max is getting all of Warner Bros.’s 2021 features day-and-date with theaters. At the same time, they are increasingly competing not just with each other, but also with gaming and social media.

Deloitte concludes that the focus of the streaming wars is increasingly broadening to other areas. “Content is still king,” it writes, “but cost may be the new queen.” It suggests that tiered pricing, combined with more sophisticated use of the data that streaming uniquely provides, will enable to companies acquire and retain customers more effectively. Additional benefits, such as exclusives or discounts across other services, may also help.

Our one overarching takeaway from the report: if anyone is winning in the streaming wars so far, it’s the consumer.