Some 19% of U.S. broadband households have cancelled an “Over The Top” service in the past 12 months.
That’s actually a slight improvement for the 2015 calendar year, when 20% of U.S. broadband households didn’t cut the cord, but opted opt of “OTT.”
This suggests that the all-important churn rate for services such as Netflix, Amazon Video and Hulu isn’t fluctuating — with 8 out of every 10 U.S. broadband household that has such a service sticking with it.
The data comes from an annual review of U.S. broadband households by Parks Associates.
“The churn rate has held steady,” said Parks’ Senior Director of Research, Brett Sappington. “These are not free trials but instances where consumers are spending real money to try out new OTT services.”
But, Sappington adds that one-third of households that currently subscribe to an OTT video service have cancelled one or more services in the past year. “This shows there is quite a bit of experimentation occurring right now,” he said.
Parks’ OTT Video Market Tracker also finds that households with OTT video subscriptions increased their spending from an average of $3.71 per month in 2012 to $7.95 in 2016.
At the same time, spending on physical media purchases and rentals declined from an average of $15 per month to $8 per month, and spending on digital transactional video declined from an average of $2.42 per month to $1.42 per month.
“On average, spending on subscription OTT video services now accounts for 85% of all household spending on internet video,” said Parks Senior Analyst Glenn Hower. “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.”
Parks Associates notes that churn is lowest among the top three most established services (Netflix, Amazon, and Hulu), and these providers are in a race to add new content and services or to match each other in new features to prevent any migration of their subscribers to a competitor.
For example, Hulu recently announced it would offer its users the ability to download videos to watch offline, such as during a flight. Amazon began the trend for downloadable content in July 2016. Netflix followed suit in November.
“These services have worked to establish core customer bases, and the inertia of these core groups provides an important baseline of ongoing revenues,” Sappington said. “They continue to refine or add to their offerings so that subscribers will continue to see new value in the service, providing ongoing reasons to remain a subscriber.”
Parks Associates’ OTT Video Market Tracker provides industry research data and analysis of competing players’ strengths and weaknesses in the space. The service includes an analysis of market trends and profiles of the nearly 100 OTT video service providers in the U.S. and Canada, such as Netflix, HBO, YouTube, and Amazon, with updated deliverables throughout the year.