Streaming Services’ Churn Rates Rise During Pandemic

40% of households that canceled an OTT service did so to cut expenses

a stack of TVs
Subscriber churn rates for streaming services were up to 41% in the first quarter of 2020. Photo Illustration: Trent Joaquin; Source: Getty Images

Key insight:

If it wasn’t hard enough getting consumers to subscribe to streaming services, it’s becoming even more difficult to keep them around. Churn rates in the streaming television world are going up, even as overall video consumption has increased, according to research firm Parks Associates.

Churn rates for OTT services were at a high of about 35% in the first quarter of 2019, an increase of 7 percentage points from the same time a year prior (28%), according to a new study published today. But that rate ticked even higher in 2020: Churn was up to 41% in the first quarter of the year.

The survey, which fielded more than 10,000 broadband internet households in the U.S., found that about 40% of households that canceled an OTT service in the second quarter of 2020 did so out of a need to cut expenses, underscoring the continued economic pressures that streamers and other subscription service face as the ongoing Covid-19 pandemic continues to affect streamers’ user bases.

Among the survey respondents who canceled a streaming service during the pandemic, about half said they canceled Netflix during Covid-19, while more than 30% reported pulling the plug on their Hulu and Disney+ subscriptions. More than 30% of survey respondents canceled a streaming subscription because the promotional price for the service ended.

Nearly 60% of survey respondents who had recently signed up for new streaming services said they intended to cancel Apple TV+, and more than 40% intended to end their subscriptions to Hulu, Amazon Prime Video, Disney+ and Netflix. Cancellation intent was lowest for CBS All Access at under 40%.

The data, presented at the StreamTV Summer Research Summit, underscores a major hurdle for streamers as they seek to woo new customers with original programming and generous promotions: keeping them. Without long-term contracts and commitments, streamers must look for other ways to keep customers locked in, whether it’s with their programming release schedules or through discounted annual rates or other up-front payment structures.

Streaming incumbents generally have lower churn rates overall, Parks Associates found, because customers who have been around for a long time are less likely to cancel. With virtual MVPD services, though, newer players like YouTube TV and Hulu + Live TV generally see lower churn rates compared to incumbents like Sling TV and DirectTV Now.

Most in the industry agree that Covid-19 has served as an accelerant for the adoption of OTT services, and Parks Associates’ research is no different: More than three in four survey respondents subscribe to at least one OTT service, a year-over-year increase of 6 percentage points, and a quarter of them used an ad-based OTT service in the past 30 days, 5 percentage points higher than a year prior.

One quarter of survey respondents subscribe to Disney+ and nearly one in 10 subscribe to Apple TV+, highlighting room for new streaming entrants to gain a major foothold in a short period of time. Among ad-supported streamers, though, there’s no top dog: While Pluto TV, the Roku Channel and Crackle lead the category, no service has more than 7% adoption.

@kelseymsutton Kelsey Sutton is the streaming editor at Adweek, where she covers the business of streaming television.