Is Advertising the Answer? Recent Study Reveals a Third of Users are Likely to Cancel a Streaming Subscription in the Next Year
Streaming services need to rethink their monetization models, and user openness to advertisements in exchange for lower prices could be the answer.
The pandemic has had a lasting effect on streaming behavior. However, signs of subscription fatigue are starting to show. The Global Streaming Study by strategy consultancy Simon-Kucher & Partners shows that more than one third of users are likely to cancel a subscription in the next 12 months. However, more than half (53 percent) would reconsider if their subscription fee was lower, even if that means advertising is shown. This indicates the potential for hybrid models (subscription fees + ads) and opens the door for a new era of streaming monetization.
Key insights from Simon-Kucher’s Global Streaming Study:
- One in five users (23 percent) report finding it hard to manage the number of subscriptions they have.
- Price is the most common reason for cancelling a subscription. 39 percent cancelled to save money, and 30 percent cancelled because the price was too high.
- The older the users, the less likely they are to cancel. While approximately 40 percent of users under 24 have canceled, only 20 percent of user over 60 have canceled a subscription in the last year.
“Streaming subscriptions are price-sensitive products. We do see customers canceling their subscriptions because they don't have time, but in a lot of cases, they have multiple subscriptions running in parallel, and the total cost of this gets expensive" explains Lisa Jäger, Partner and Global Head of Technology, Media & Telco at Simon-Kucher & Partners.
Users increasingly open to hybrid subscription models
Subscribers in the US, India, and China are the most open to advertisement monetization models, with three in five respondents likely to stay if introduced. However, continental European users are more conservative, with only two in five likely to stay.
Netflix subscribers globally also display a high acceptance for a hybrid model between subscription fees and ads. Over three-quarters of their users would not cancel their subscription if ads were shown. However, 14 percent would expect no price increases for the next year and 31 percent would expect a lower price in return for accepting ads.
“New monetization models can be a way for providers not to lose even more customers," says Lisa Jäger. “A monthly subscription fee plus advertising, or completely different hybrid models which have been known for a long time from music streaming, such as Spotify, are now also conceivable. This is at least from the user’s point of view, for streaming films, series and so on. Advertising is not necessarily a reason for termination, but prices that are too high are.”
Opportunity for regional customization of portfolios to user preferences
While all content types have become more popular, most streaming time is spent watching films. Almost half of users (47 percent) now spend more time streaming films than they did pre-pandemic.
Although films are the most popular in all countries, there are relevant differences in the second and third most watched categories; Documentaries are more popular in Germany, Netherlands, and Brazil, while comedy TV shows are score more highly in the US, China, Australia, and Singapore. Differences in the most-watched categories indicate different user segments between countries. These insights provide another avenue to customize regional streaming portfolios and improve user experience and retention.
Further study results (for press/media and partner companies) available on request.
*About the study: The Global Streaming Study results are based on a representative survey conducted by Simon-Kucher & Partners in April and May 2022. Over 12,000 respondents from 12 countries (Australia, Brazil, China, France, Germany, India, Netherlands, Singapore, Spain, Sweden, United Kingdom, United States) were asked about streaming behavior, content preferences and willingness to pay.
Simon-Kucher & Partners, Strategy & Marketing Consultants:
Simon-Kucher & Partners is a global consulting firm with more than 1,600 professionals in 42 offices worldwide focusing on TopLine Power®. Founded in 1985, the company has over 35 years of experience providing strategy and marketing consulting and is regarded as the world’s leading pricing advisor.