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Netflix has lowest OTT US subscriber churn rates

Netflix still leads the OTT market in the US, where 52% of all US broadband households were subscribed to the service by the end of 2015, according to research by Parks Associates. 

The ‘OTT Video Market Tracker’ also showed that at the end of 2015, around 20% of US broadband households had cancelled at least one OTT video service in the past 12 months.

 

Low churn

Netflix was revealed as being the service with the lowest churn rate as a percentage of its total subscriber base. In the past 12 months, 5% of US broadband households cancelled their Netflix account, including those who cancelled at the end of the trial period. That figure was up from 4% in Q2 2015 and represents 9% of the company’s current subscriber base.

By contrast, 7% of US broadband households cancelled a Hulu subscription in 2015, which represents approximately half of Hulu’s current subscriber base. This was roughly the same churn rate that was observed in Q2 2015.

In addition, 5% of US broadband households indicated that they had unsubscribed from Amazon’s Prime Video service in 2015, a figure that represents 19% of those who claim to be current subscribers to Amazon Prime Video.  This number shows that the churn rate for Amazon’s video service declined slightly from Q2 2015 to the end of the year.

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Consumer experimentation

Several factors contribute to OTT video service churn by consumers, according to Brett Sappington, senior director of research at Parks Associates. “In some instances, consumers are experimenting with new services, trying a service and cancelling before the trial period ends or within a few months,” he said. “Popular shows or events, such as HBO’s Game of Thrones or WWE Network’s Wrestlemania, can be beneficial in terms of attracting users.”

However, Sappington noted that there is a risk that consumers will unsubscribe once they’ve watched these popular items. “Ongoing perceived value, in the long run, is the biggest driver to churn,” he added. “Services have to continue to provide users with validation of value and a reason to return. Otherwise, consumers will discontinue services to save money or because they feel that the subscription is not worth the cost.”

Busy market

There were 101 OTT video services available in the U.S. market as of March 2016, according to Parks Associates. Only 5% of U.S. broadband households have a subscription to one or more of the 98 options beyond Netflix, Amazon, and Hulu. This list includes CBS All Access, Sling TV, HBO Now and Crunchyroll.

The report showed that 3% of U.S. broadband households cancelled a subscription to an OTT video service other than one of the top three in the last 12 months. The tracker also indicated that 33 new OTT services entered the US market in 2015.

“On a service by service basis, the smaller OTT video services have relatively high churn, particularly relative to Netflix and Amazon,” concluded Sappington.

“Reasons for cancellation vary by service, but there are some common trends. Cancellers of OTT services with linear features such as Sling TV, CBS All Access, and PlayStation Vue are more likely to subscribe with the intent to terminate the subscription after watching specific content. They are also more likely to be critical of a service’s interface than those who cancel VOD-only OTT video services.”

Of the total of all US broadband households, 64% subscribe to an OTT video service, a number that is up from 59% in 2015.

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