According to a report from Antenna, more than 140 million subscribers canceled their streaming plans in 2023, as consumers push back against price increases. However, Antenna finds that almost 25% of those customers re-subscribe within 3 months.
Antenna Strategy Director Brendan Brady joins Yahoo Finance to give insight into the report, detailing the trends driving the cancelation and re-subscription churn.
Brady puts subscriber retention in perspective: "If you take a cohort of consumers and you see how they sort of decay or cancel over time, it's not linear, right? It sort of decays very steeply and then flattens over time. The more months you're paying for the service, you're less likely to cancel. So that month zero to month three window is super fragile and important for these services to really win that customer. And what we found is that there's a high amount of subscriptions held in those early tenure periods. If you look at the nine biggest services, 39% of subscriptions that we measure are in their first year of tenure and if you remove Netflix (NFLX) from that calculation, it goes up to 45% so nearly half of subscriptions are in their first year of tenure and that's really when you're most at risk to cancel."
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Editor's note: This article was written by Nicholas Jacobino
Video Transcript
AKIKO FUJITA: Well, it has been a choppy ride for the streaming industry, from cracking down on password sharing to additional price hikes, consumers wary of seeing their streaming bills rise are starting to push back.
More than 140 million subscribers canceled their streaming subscriptions last year. That's the most cancellations in five years. But roughly a quarter of customers resubscribe within three months of cancelling their subscription, according to an Antenna report.
For a deeper dive on the study, we are joined by Brendan Brady. He is Antenna strategy director. Brendan, this is a fascinating study. It answers many of the questions we've had about these streaming sites. So let's talk first about the cancellations that these sites saw.
How much of that is about customers becoming a little more cost conscious? How much of this is about just the sheer number of services that are out there, customers just can't keep up?
BRENDAN BRADY: I think it's the latter more than anything. there's. More choice than ever in terms of where you can access premium film and television content. There's also no switching costs associated with streaming. You can cancel a service in one, two, maybe three clicks.
And so we're seeing the consumer become more habituated to moving of in and out of these services. And that's been the primary driver of this increase in churn that we've seen as of late.
AKIKO FUJITA: Yeah. We're talking about cancellations. But what your study also found that a lot of those customers do come back. So let's talk about the churn. How quickly is that churn happening right now? And who's most affected by it?
BRENDAN BRADY: So if we look at the consumer behavior around re-subscription, which is a core metric of ours here at Antenna, it's really on the rise, the behavior, overall, of canceling a service first, but then also adding it back.
And so if we look at the nine biggest streaming services in the US, 25% of customers are coming back within three months after canceling. Fast forward to 12 months, and it's about 40% of customers.
We see that Peacock and Netflix, actually, in this past year, saw the highest instance of winning back those customers at a quick rate. And I think a lot of it is driven by content. So maybe you subscribe to Peacock to watch "Sunday Night Football," when the season kicks off. And then when the season ends, you might cancel, but you come back.
And we really see that the consumer is getting increasingly comfortable with moving in and out of these services with a lot more rigor.
AKIKO FUJITA: And Brendan, any sense on what some of those shows are or those offerings are that bring the consumers back, at least, brought them back, if you're looking at 2023 data?
BRENDAN BRADY: I think it's hard to say a specific title, just given that everyone has different tastes. But, overall, we certainly do see that the consumer will cancel, but then they'll also come back. And the implication there is that services now have to begin to manage these customers, not only over a single lifetime, but, really, think about their relationship with that platform more holistically.
AKIKO FUJITA: What's interesting to me, though, even though we're talking about re-subscriptions or re-subscribers, however you want to use the term, it is still also, for these brands or platforms, all about getting the new subscribers on board to, at least, lock them in to these services.
What did your study find about how that strategy is working? That three-month window you talk about to me is so fascinating, because have to wonder what the calculation is among those customers who've signed up to say, is this something that's worth keeping?
BRENDAN BRADY: So if you take a cohort of consumers, and you see how they decay or cancel over time, it's not linear. It decays very steeply. And then flattens over time. The more months that you're paying for the service, you're less likely to cancel.
And so that month zero to month three window is super fragile and important for these services to really win that customer. And what we've found is that there's a high amount of subscriptions held in those early tenure periods. If you look at the nine biggest services, 39% of subscriptions that we measure are in their first year of tenure.
And if you remove Netflix from that calculation, it goes up to 45%. So nearly half of subscriptions are in their first year of tenure. And that's really when you're most at risk to cancel. And so it's really important for these services to consider, who is that subscriber? What else are they paying for? What else are they watching? And really try to manage them so that they can get them past that fragile period and more towards the area of the survival curve, where things start to flatten out.
AKIKO FUJITA: Brendan, what's the threshold for the average customer? Is it three platforms, three subscriptions, four subscriptions? What did you find?
BRENDAN BRADY: I can't give an absolute number. But if we look at it broadly, we see that the subscriptions per subscriber is consistently growing. At the same time, churn is increasing.
And so maybe you have three subscriptions in a given month. And the next month, you have two. or the next month, you have one. And maybe, the next month after that, you have five. We're in a world where there's virtually no switching costs associated with this, which is quite unlike cable, where you had to call someone, they would have to pick up your box, and so on.
And so we really see that the consumer is adding services strongly, but also canceling services with the same amount of strength.
