The close of a year is often a period of reckoning. And in the case of 2021, tension is high and nerves are fraught as COVID is close to wrapping up its second year.
We’ve talked about those nasty end-of-year layoffs these past few years in the radio broadcasting business. It wasn’t that many years ago when companies waited until after the new year to issue pink slips, the idea being that even lousy employees deserve their holiday time without being on the beach. Let’s hope this year is different.
Tis the season for predictions. And this post takes a look at what has become a major habit here in the U.S. and round the world – streaming subscription video and by extension, audio streaming for a monthly fee as well.
We’ve talked a great deal about “The Subscriber Economy” in this blog, a phenomenon that was building pre-COVID, and exploded when the lockdowns and stay-at-home orders became realities in 2020.
So, here we are at the end of another year of the pandemic, taking stock of the world and our place in it. Many of us use this quiet time to reassess, to consider a diet and a fitness regimen – one of the reasons why health clubs and gyms enjoy a joyous January.
Others of us examine our financial situations, often aided by a CPA or an income tax service. After all, those credit card bills covering all that December gift giving come due sooner rather than later. It’s the time when many begin to question their spending habits, especially for non-essential goods and services.
And now Deloitte has issued a new analysis with the ominous title, “As the world churns: The streaming world goes global.” Their report suggests the term “churn” could become a much bigger part of our vocabularies. This is especially the case for SVOD providers such as HBO Max, Disney+, Hulu, and all the others that offer subscriptions in exchange for on-demand, (mostly) commercial-free content.
Now, Deloitte is suggesting a “churn rate” in the U.S. that could go up to 30%. That’s a whole lot of cancellations – 150 million to be more accurate. Deloitte tells us America is #1 for churn.
For SVODs, that comes with a huge cost. Consider this: In the U.S., streaming video brands may spend as much as $200 to capture a single subscriber. At those rates, retention becomes critically important.
Americans lead the world in paying for content. And that may explain why the “churn rate” here is expected to be very high. As the Deloitte team explains:
“Many have become overwhelmed by managing and paying for all those subscriptions, and they have become more sensitive to their cost. These conditions can drive customers to cancel subscriptions and/or seek less expensive ad-supported offerings, both to manage costs and as a way to pay only for the content they want by adding and cancelling services as needed.”
Where have we seen this phenomenon before? In this year’s Techsurvey, of course.
We asked respondents whether subscription fee for video and audio streaming services are a concern, and more than six in ten agreed; nearly three in ten agreed strongly. And remarkably when you look at the demographic breakouts, mounting subscription fees are very much a problem no matter who is answering this question. It’s no wonder the Deloitte report reflects this phenomenon.
If Deloitte’s projections are accurate, 150 million chickens will be coming home to roost. Interestingly, a companion feature in NextTV by David Bloom treats the study like a four alarm fire. His “hair on fire” sub-headline says it all:
“Deloitte shocks – shocks! – the streaming biz by projecting a massive 150 million service cancellations next year”
Bloom says two SVODs will probably get through this dicey period relatively unscathed:
Netflix and Disney+
The former uses the “more is more” strategy, throwing a cornucopia of video content at our big screens hoping to find that big hit. They pulled it off with “Squid Game” earlier this year, and “Tiger King” back when we first started wearing face masks. Netflix also has the edge for being first-in, almost always an advantage.
For Disney+, it’s simpler. That service, launched right before the pandemic in November 2019, has the good fortune of appealing to a hugely important and massive tribe – kids. And parents appreciate both a peaceful and safe household.
I would add a third – Amazon Prime Video. It has a force field around it known as Amazon Prime, the all-encompassing service that now includes 153 million subscribers in the U.S. That helps keep their SVOD service in second place behind Netflix.
For everyone else in the space, it’s a demolition derby of subscription services. May the best content win.
What are the implications of this coming cancellation frenzy? As Deloitte suggests, consumers will not only nix some of their subscriptions – they’ll “seek less expensive ad-supported offerings, both to manage costs and as a way to pay only for the content they want…”
And for broadcasters – radio and TV – that spells potential opportunity. Bloom notes that traditional media brands will need newly crafted strategies to take advantage of this churn fest.
Will the same phenomenon take place for streaming audio, as subscribers assess fees for Spotify, Pandora, Amazon Music, Apple Music, and of course, SiriusXM? It’s hard to say, of course. But Techsurvey suggests that if they view video and audio fees in one big expensive bucket, cancellations could impact on-demand content services in general.
So, what to do?
Remember that a key motivator for listening to broadcast radio in the first place is that the service is free. In some years that matters more than in others. In our 2021 Techsurvey, it ranked a solid #3. In fact, six in ten respondents said radio’s toll-free business model is a key driver in their listening – ahead of music, news, sports, traffic, and contests.
Techsurvey 2022 hits the field right after the new year, so we’ll see whether radio’s “no monthly fee” attribute holds up. But I can tell you that since we’ve added this stealth radio benefit to the above list, it’s finished in the top 5 each and every year.
As more and more consumers point to the rising costs of everything, there’s no reason to think those nasty subscription fees won’t be top-of-mind when they begin to scan their credit card statements next month.
At a time when inflation is raging and the price of everything is heading north, a business predicated on subscription fees just might find they’re living in a house of cards.
Let’s get real: radio’s commercial (over)load is an industry-wide self-inflicted wound (hello, public and Christian radio!). And an ad-supported business model has its disadvantages in 2022.
That said, the second most powerful word in the world of marketing after “new”…
…may be “free.”
Time is growing short – to take care of your holiday shopping AND to make sure your station is signed up for Techsurvey 2022, the biggest radio research study on Planet Earth. Join more than 400 commercial radio stations across the U.S. Information and registration is here.
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