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Churn rates “extremely high” for OTTs like Netflix

Source: Parks Associates

Source: Parks Associates

New research from Parks Associates reveals high churn rates for many OTT video subscriber services.

In the past 12 months, 4% of US broadband households have cancelled their Netflix service, representing nearly 9% of Netflix’s current subscriber base. By comparison, 7% have cancelled their Hulu Plus subscription within the past 12 months, a figure that represents approximately one-half of Hulu Plus’s current subscriber base.

As a group, smaller OTT video services have extremely high churn rates as well. Seven percent of U.S. broadband households subscribe to an online video service other than Hulu, Amazon Instant Video, or Netflix. The number of people cancelling one or more of these services over the past year represents 60% of those who subscribe currently.

“Through the OTT Video Market Tracker service, we are tracking the details and trends of over 75 OTT video services active in the U.S. market along with another dozen or so services planning to enter the market within the next few months,” comments Brett Sappington, Director, Research, Parks Associates. “The high churn rate for many of these services suggests that consumers are holding onto their Netflix account while experimenting with the wide variety of other video subscription options.”

Currently, 85% of U.S. broadband households subscribe to a pay-TV service, and 59% of U.S. broadband households access an OTT video subscription. Of those who use OTT video, just under 50% use two or more services.

“To shed a number of subscribers equal to half or more of your current subscriber base is a huge problem,” Sappington adds. “Customer acquisition costs for an OTT subscription service are relatively low, particularly compared to pay TV, but OTT video services will eventually have to capture and retain their customer bases over time in order to survive in the long term.”

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