New numbers show that 19% of broadband households in the United States have canceled an “over the top” video service like Netflix or Hulu in the past 12 months. While that might sound like bad news for the streaming industry, it’s really not. It just means that customers today have more options, and that it’s easier than ever to try out new services.
The “churn rate” for over the top video, as industry experts call it, is how often paying customers cancel a service (not counting free trials). It currently stands at 19% – roughly one in five homes. But that’s actually down from 20% in 2015. And Netflix, Hulu, and Amazon all individually have lower churn rates than this time last year. As the “big three” in the streaming industry fight to keep up with each other, that’s to be expected though.
These numbers don’t mean that people aren’t watching streaming video, it just means they’re experimenting to find what they like. Instead of being locked into a long term cable contract, customers have the option to try out a service for a few months and easily cancel if they don’t like it. Last year, it was estimated at 67% of Netflix subscribers still had a cable subscription as well. That number is on the way down as people try out more options.
Glenn Hower, Senior Analyst with Parks Associates, said, “OTT video services now account for 85% of all household spending on Internet video. The key to success in the long term will be retention. Consumers are experimenting with different OTT services, and many providers incorporate no-contract, cancel-anytime models to remove barriers to entry and to entice consumers to try new services free of obligations.”
The same research also showed that the average spending on OTT video has increased to $7.95 a month, up from $3.71 per month in 2012. At the same time, the amount spent on physical media had dropped to half of what it used to be – from $15 a month to $8.