As streaming wars heat up, what are consumers willing to pay?

EXPERIENCES

As streaming wars heat up, what are consumers willing to pay?

We recently surveyed 5,190 adults to find out how consumer streaming habits are evolving, what they would like to pay, and the leading reasons for cancellation.

Jon Cohen

December 2, 2021 | 4 min read

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It took more than 10 years for Hwang Dong-hyuk to get “Squid Game” made, but only four weeks for more than 140 million viewers to make it Netflix’s most-watched show of all time. The still-raging pandemic continues to boost streaming services more broadly, but fresh challenges have emerged as more and more people resume pre-pandemic activities. 

Facing increased growth pressure, all of the platforms are concerned about how consumers spending less time at home and subscription fatigue will impact the number of streaming services they plan to keep. We were curious too and recently surveyed¹ 5,190 adults to find out how consumer streaming habits are evolving, what they would like to pay, and the leading reasons for cancellation. The big reveal from our research: streaming’s popularity is solid and rising, but pricing power is limited. 

What’s the best price point for a streaming service? $11 

Across the industry, streaming services are testing the waters for price sensitivity and churn. In September, Disney raised the price of its Hulu streaming service by $1, while HBO Max slashed prices in a limited offer. In this hyper-competitive landscape, streaming platforms want to know what consumers are willing to pay.

We ran a Van Westendorp price sensitivity analysis to determine the range of acceptable price points for a product by asking consumers how much is “too expensive”, “a good deal”, “almost too expensive,” and “too expensive”. 

This analysis on willingness to pay for a streaming service determined that consumers are most willing to pay between $11 to $16 for a streaming service, with $11 being the optimal price. One thing to note is that we see there is minimal change in demand between the $11 and $14 price point, illustrating the potential for a price point that falls within that range.

Streaming remains popular through ongoing pandemic but trends lower than 2020

Despite more adults in the U.S. returning to pre-pandemic activities, binge-watching is a pastime that appears to be sticking. More than one in three U.S. adults are streaming more now compared with before the pandemic, similar to levels seen earlier this year in March, but lower than the 50% a year ago.

According to our research, 35% are using a streaming service every day, down from 46% in September 2020. And 70% stream at least weekly, down from 77% in September 2020 and a high of 79% in May 2020.

Our research in September 2020 revealed that Netflix was the preferred streaming platform of choice, and that’s still true this year: 80% of adults use Netflix, up from roughly 60% before the pandemic. Apple TV+, HBO MAX, and Peacock are all at record highs in our data, and while Disney Plus is running flat, it’s also significantly higher than it was early in the pandemic. As a warning sign to all in the industry, Amazon Prime, Hulu have both lost ground since the fall of 2020. 

It will be interesting to see how a potential winter surge and the different platform’s content slates impact streaming habits.

Price and subscription fatigue are the leading reasons for cancellation

Coming out of the pandemic, it’s no surprise that consumers are doing the math on all the streaming services they amassed and thinking about cutting a few. Our report revealed that monthly spending on streaming services has increased over the last two years: nearly four in 10 (38%) of subscribers are paying $25 or more per month on streaming services, up from 23% in 2019. 

So, what does the consumer subscription cancellation landscape look like? In the past month, 28% of U.S. subscribers have canceled at least one streaming service.

28% of U.S. subscribers have canceled at least one streaming service in the past month.

Out of this group, 35% cited high costs as their main reason for cancellation, followed by too many subscriptions (17%), and temporarily subscribing to watch a specific show (13%).

For those that are planning to cancel in the next month, 36% cited costs, followed by too many subscriptions (22%), and running out of content (13%) as top reasons.

Factor in rising inflation and these numbers could drastically increase, prompting a greater need for streaming companies to anticipate consumer needs, especially pricing.

Subscription growth is cooling but the streaming wars will get more intense

The streaming wars have been heating up for years, but with slowing subscription growth and shifting consumer streaming habits, the battle for their attention and wallets will intensify. 

Adhering to consumer financial concerns will play a big role in winning the streaming war in the short term, but streaming platforms will need new insights to innovate new product offerings and pricing models. 

As the industry rapidly evolves, there will be clear winners and losers - luckily they don’t have to play “Squid Game” to win.

Jon Cohen is chief research officer at Momentive.

¹This Momentive study was conducted between October 29-November 3, 2021 among a national sample of 5,190 adults. Respondents for this survey were selected from the more than 2 million people who take surveys on the platform each day.

 

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