Netflix added 200 million new subscribers during the epidemic, but the video subscription cancellation rate has jumped to 37%

Deloitte 's 15th Annual Media Trends Report shows that even though Netflix has achieved an astonishing growth of over 200 million subscribers during the epidemic, consumers are canceling video subscription services at a record rate.

After the epidemic, the video subscription cancellation rate jumped to 37%.

Deloitte surveyed 2,009 American consumers about their entertainment preferences in February , and found that on average each respondent subscribed to four streaming services, down from five in October last year. And although 82% of consumers still subscribe to paid videos, people are becoming more picky in this regard as the epidemic eases.

Kevin Westcott, vice president of Deloitte , said that the user churn of video services is very serious, which means that the proportion of users canceling video subscriptions is increasing. Before the epidemic, the overall cancellation rate was low, only 20%, but from October 2020 to February 2021, the cancellation rate jumped to 37%.

“This is the highest cancellation rate we’ve ever seen in our research,” he said. “As soon as the trial period ends, they delete the service.”

Competition is fierce, and the advertising model of video platforms may change

This is also a challenge for Netflix. Although the video platform expects to add 6 million new subscribers in the first quarter of this year, this is less than half of the increase in subscribers in the same period last year. To this end, Netflix must regularly release a large amount of high-quality original content to retain customers, but this may not be enough. Because in addition to the decline of the overall video media environment, Netflix also has to worry about fierce external competition.

Netflix's strong competitors include Amazon Prime Video , a portion of Amazon's more than 200 million members are already subscribers to its video streaming service; Disney+ , the video platform has gained more than 100 million users in the 16 months after its launch , a milestone that took Netflix 10 years to reach; other competitors include Hulu (more than 40 million users ), HBO Max ( 38 million), NBC's Peacock ( 33 million), Paramount+ ( 30 million), Discovery+ ( 11 million) and Apple TV+ ( 10 million).

Westcott said that so far the focus has been on acquiring new customers, but in the next one to two years the focus of video streaming services will shift to customer retention.

He also gave a solution for reference, which is to integrate videos, music, audiobooks, fitness and other niche content from smaller platforms into one platform. As the platform integrates all aspects of user needs, advertisers can carry out precise advertising according to user preferences.

He believes that the future video server advertising model will develop in the direction of windowing and tiering. In this model, subscribers can choose to pay extra to watch the full version without ads on the day the new video content is launched, or watch it at a discounted price after a few days when the popularity decreases, or watch the video version with ads inserted for free.

The economic impact of the epidemic has made people pay more and more attention to the payment costs behind video services, which has become the primary factor in people canceling video service subscriptions. Therefore, in order to enjoy free video services, people's tolerance for advertisements has also increased accordingly.

According to the Deloitte survey, 60 % of respondents said they are willing to watch more than 6 minutes of ads per hour in exchange for lower costs as long as the ads are relevant and non-repetitive. Only 40% of respondents are willing to pay $12 per month to subscribe to video services and enjoy ad-free videos.

Video first? Gen Z has left group chats

When it comes to the main consumer groups of video streaming, Generation Z, which has received much attention from the market, cannot be considered as an avid consumer.

Westcott said that Generation Z is the first group in Deloitte's past research history to not choose video content as their first choice for entertainment . They no longer watch drama-length movies and TV shows, and video content is not even in the top five entertainment options including games, music and social media platforms. Millennials still consider video content as their first choice for entertainment at their current age, which shows that this is a huge change.

Therefore, for video streaming platforms such as Netflix, their paid services should focus more on millennials, Generation X, baby boomers and older people.

Therefore, when sellers choose to conduct advertising promotion through video platforms, they should also pay attention to whether their target customer groups match them. At the same time, they should follow the development trend of video platform advertising models towards windowization and stratification, and explore the most efficient channel for traffic diversion and monetization!

Netflix

Video subscription cancellation rate

Generation Z

Advertising tolerance