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 astonishing growth of more than 200 million subscribers during the epidemic, consumers are canceling video subscription services at a record rate.

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

Deloitte surveyed 2,009 U.S. consumers on their entertainment preferences in February. On average, each respondent subscribed to four streaming media 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, a deputy director at 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 pandemic, people's overall cancellation rate was low at 20%, but from October 2020 to February 2021, the cancellation rate jumped to 37%.

"This is the highest cancellation rate we've seen since we started investigating," he said. "As soon as the trial period ends, they remove the services."

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

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 do this, 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 video media environment, Netflix also has to worry about fierce external competition.

Strong competitors to Netflix include Amazon Prime Video, which already counts some of its more than 200 million members as subscribers to its video streaming service; and Disney+, a video platform that gained more than 100 million in the first 16 months of its launch. users, a milestone that Netflix took 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), among others.

In this regard, Westcott said that so far everyone's attention 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 reference solution, 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 based on user preferences.

He believes that the future video server advertising model will develop in the direction of windowing and layering. Under this model, subscribers can choose to pay an additional fee to watch the ad-free full version on the day the new video content is launched, or watch it at a discounted price after a few days when the popularity subsides. They can also watch the ad-inserted version of the video for free.

The economic impact caused by the epidemic has made people more and more concerned about the payment costs behind video services, which has also become the primary decisive factor for people to cancel video service subscriptions. Therefore, people's tolerance for advertisements has increased accordingly in order to enjoy free video services.

This Deloitte survey shows that 60% of respondents said that they are willing to watch more than 6 minutes of advertising per hour in exchange for lower costs as long as the advertising content is relevant and not repetitive. Only 40% of respondents are willing to pay $12 per month to subscribe to a video service to enjoy ad-free videos.

Video first? Gen Z has left the group chat

As for the main consumer groups of video streaming, Generation Z, which has attracted much market attention, cannot be regarded as enthusiastic consumers.

Westcott said that Generation Z is the first group in the history of Deloitte’s research that does not use video content as the first choice for entertainment. They no longer watch drama-length movies and TV shows, and video content is not even included in entertainment including games, music and social media platforms. Top five among event options. Millennials still regard video content as their first choice for entertainment at their current age, which shows that this is a huge shift.

Therefore, for video streaming platforms such as Netflix, the people whose paid services should focus more are Millennials, Generation X, Baby Boomers and older people.

Then, when sellers choose to promote advertising 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 windowing and layering, and explore the most efficient way. Channels for diversion and monetization!