Cost-conscious consumers are trimming the number of subscription streaming video services they pay for, providing another headwind for those businesses. But some services, such as Netflix, are proving stickier than others.
An annual survey of broadband-subscribing TV watchers in the U.S. by Hub Entertainment Research showed a drop in usage of subscription video-on-demand, or SVOD, services in the most recent poll.
"Most people are doing that for economic reasons, because of inflation or they're worried about the economy," said David Tice, a consultant with Hub.
The percentage of consumers subscribing to at least one SVOD service dropped to 82% in 2023 from 89% in 2022.
Meanwhile, the percentage of respondents getting two or more of the top five SVOD services dropped to 61% this year from 71% last year. Those getting three or more of the services fell to 43% from 50%. The top five SVOD services are Netflix, Amazon Prime Video, Hulu, Walt Disney's Disney+ and Warner Bros. Discovery's Max.
Netflix Is Hard To Walk Away From
The results of the Hub survey point to more SVOD service trimming in the year ahead. Just 27% of respondents expect to sign up for a new TV subscription in the next six months. That's down from 33% last year.
The change in consumption by U.S. TV watchers comes as the major streaming services have shifted their focus to profits over growth. To bolster their streaming video businesses, companies have raised prices, lowered spending on new content and reduced their streaming libraries.
As consumers shrink their bundle of TV services, they are giving priority to some over others.
"Netflix is still the 800-pound gorilla in the room and it takes a lot to get people to walk away from that," Tice said.
Meanwhile, Amazon has other Prime services, such as free delivery of e-commerce purchases, to keep customers loyal, he said. And Disney has kids programming and hot franchises like Marvel and Star Wars, Tice said.
Smaller players like Paramount's Paramount+ and Comcast's Peacock will need to consider consolidation or bundling to stay in the game, Tice said. Some studios even might abandon their direct-to-consumer streaming video offerings and switch to a traditional content licensing model, he said.
JPMorgan Survey Also Shows Drop
Results of a JPMorgan survey this month also showed a decline in the number of SVOD services consumers are using. The average SVOD subscriber now takes 4.2 services, down from 4.7 in the first quarter and 4.8 in the fourth quarter last year.
Price increases and weaker content slates could explain the drop in SVOD usage, JPMorgan analyst Philip Cusick said in a note to clients.
Consulting firm Deloitte pointed to "subscription fatigue" among consumers as another reason for the drop. In the firm's latest Digital Media Trends survey, about half of respondents said they "pay too much" for SVOD services, while about one-third said they intend to reduce their number of entertainment subscriptions.
Around half of consumers (47%) surveyed said they have made at least one change to their entertainment subscriptions because of their current financial situation. That includes canceling a paid service or switching to a lower-cost, ad-supported version of a service.
Streaming Video Services Are Easy To Switch
Other consumers are keeping the same number of SVOD services by dropping one and adding another.
"People have gotten much savvier about how to juggle the different services," Tice said. "One of the great things about the streaming services is that they're very frictionless. You can start and stop them when you want to."
He added, "There's a subset of people out there who will subscribe to Apple TV+ for a month or two and watch everything they want to watch on that and then cut that subscription and subscribe to Peacock or something else for the next two months and catch up on that."
In the first quarter, Netflix added 1.75 million subscribers worldwide, pushing its total to 232.5 million. But most of those new subscribers were in the Asia Pacific region. In the U.S. and Canada, it added just 100,000 subscribers.
Meanwhile, Disney's flagship streaming video service, Disney+, lost 4 million subscribers during the first three months of the year. Its total subscribers dropped to 157.8 million.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
