According to research from Parks Associates, a fifth of broadband US households have cancelled at least one over-the-top (OTT) video service in the past 12 months, up two percentage points from a year ago.
Brett Sappington, senior director of research at Parks, said that Netflix is still the OTT leader in the US, with 52% of all US broadband households subscribing to the service at the end of 2015. Netflix also had the lowest churn rate as a percentage of its total subscriber base. In the past 12 months, just 5% of US broadband households cancelled their Netflix account, including those who cancelled at the end of the trial period. That figure represents 9% of the company’s current subscriber base.
The report revealed that 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. 7% had cancelled a Hulu subscription in 2015, representing approximately half of Hulu’s current subscriber base.
“Several factors contribute to OTT video service churn by consumers,” Sappington remarked. “In some instances, consumers are experimenting with new services, trying a service and cancelling before the trial period ends or within a few months. 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, there is a risk that consumers will unsubscribe once they’ve watched these popular items,” Sappington said. “Ongoing perceived value, in the long run, is the biggest driver to churn. 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.”
Overall, about 14% of US broadband households subscribe to Hulu, and 24% have a subscription to Amazon. The churn rate for Amazon’s video service declined slightly from Q2 2015 to the end of the year. There were 101 OTT video services available in the US market as of March 2016. Only 5% of US 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. 3% of US broadband households cancelled a subscription to an OTT video service other than one of the top three in the last 12 months.
“On a service by service basis, the smaller OTT video services have relatively high churn, particularly relative to Netflix and Amazon,” Sappington said. “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.”