The past several years of the streaming wars have been all about which service could rack up the most subscribers. But as the competition heats up around the world, subscriber churn is going to become a bigger concern, Deloitte Global predicted.
In 2022 alone, at least 150 million paid streaming subscriptions will be canceled, the firm estimated in a new report. That equates to a 30% churn rate.
Churn — when a household cancels a subscription — has been highest in the U.S. where Netflix, Hulu, and Amazon's Prime Video have been competing for subscribers for several years, with Disney+ joining the fray in late 2019. In 2021, per Deloitte, around 80% of U.S. households subscribed to a streaming service, and those households had a 35% churn rate.
With new streamers looking to attract customers overseas — including HBO Max and Paramount+, not to mention local streaming challengers — competition in international markets is growing and churn is expected to increase.
"As leading streaming providers expand globally while national media companies spin up their own domestic streaming services, the amplified competition is creating abundant consumer choice — and churn is accelerating as a result," reads the Deloitte report.
The firm specifically pointed to Europe, where the streaming market has followed similar patterns to those in the U.S., as a region where churn will increase in 2022, though it estimated that rates will stay below 25%.
Streamers can insulate themselves from churn by continuing to invest in programming that will resonate with audiences in each of the regions where they operate. To wit, Netflix's investments into local-language programming with global appeal is paying off with hits like "Squid Game."
Disney, in its annual report filed Nov. 24, disclosed that it would invest $8 billion more in content in 2022 — for a total of $33 billion — due to "higher spend to support our DTC expansion." This indicates the company will inject fresh programming into Disney+, Hulu, and ESPN+, which could help it stanch any potential subscriber churn. That will be particularly important for Disney+ as the service — which has been slow to ramp up its original programming output — continues to roll out in new international markets.
Deloitte noted in its report that streamers can learn from the free, ad-supported services that proliferate in Asia, suggesting that offering multiple price points "can also help insulate them from churn." Hulu, HBO Max, Paramount+, and Peacock do this, selling lower-priced options on their services that include advertising.
But churn isn't always permanent. In regions where churn is highest, the report noted, "many of those cancelling may resubscribe to a service that they had previously left."
