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    Advertising, Connected TV

    Inflation is Driving Streaming Cancellations—But Content is the Cure

    How Advertisers Can Win in This New World of Hidden Fees and Subscriber Loss

    Inflation is Driving Streaming Cancellations—But Content is the Cure

    4 Min Read

    Like other goods and services, streaming services are not immune to inflation. As the cost of living continues to climb, consumers are cutting back on discretionary spending—and that’s putting some streaming services in the crosshairs. Today’s CTV viewers subscribe to an average of five services, and 44% of viewers have more subscriptions than they did two years ago which means services have plenty of competition for wallet share. But as subscription rates butt up against inflation trends, a new study shows that quality content will keep people engaged—meaning advertisers need to diversify across the top networks to always stay where viewers are watching.

    Inflation vs Content: The War for Customers

    A recent Recurly study, Pandemic vs. Endemic Impacts and Trends on Subscription Services, found that inflation is having a real impact on streaming service subscription numbers.  According to the report, “As a result of the current goods and services, 31% [of those surveyed] say they plan to cancel some subscription services this year.” A big driver for cancellations? Subscription rate hikes. 46% of survey respondents said they canceled a subscription due to price increases in the last year.

    If the blowback to rising fees sounds familiar, that’s probably because it was one of the suggested reasons for Netflix’s record subscriber loss earlier this year. As Netflix’s disastrous first quarter cratered share prices, the company announced a new ad-tier offering—which was just in the news again thanks to a partnership with Microsoft—and a determination to cut down on password sharing. And it’s that crackdown that has led to this week’s announcement of a new test fee – potentially bringing cable’s hidden and additional fees to the world of Connected TV.

    Hidden Fees Come to Streaming

    Netflix’s latest fee, announced earlier this week, is the latest tool in its war against password sharing. Tested in markets in Argentina, the Dominican Republic, El Salvador, Guatemala, and Honduras, the new “extra home” fee charges subscribers anywhere from $1.90 to $2.99 a month—for each extra home that Netflix is used on. The service still lets users watch on their laptop or mobile device while traveling, or use it on a TV outside of the home for up to two weeks. After that, the service will be blocked until users add an “extra home” and pony up.

    This fee follows a similar “extra member” fee that Netflix tested four months ago in Chile, Costa Rica, and Peru, which charged $2-3 per month per viewer. Netflix is apparently looking to implement a broader, worldwide rollout of these fees by 2023, though they haven’t committed to pricing or what kind of fee will be used in other markets. With subscribers more concerned than ever about rising fees, Netflix has the unenviable job of announcing and implementing this feature—but their cheaper, ad-supported offering that’s coming might help soften the blow.

    Quality – and Content – Is Still King

    Sounds pretty doom and gloom, right? Thankfully, there’s a white knight for streaming services: quality, must-see content. Recurly’s study concluded that while inflation and rate hikes are the driving causes of service cancellations, viewers will stick around for exclusive, quality, compelling content. 44% of Millennials and Gen Z viewers said they’d stay subscribed for access to “exclusive or compelling content or services.”

    It’s that philosophy that was on full display this past weekend at 2022’s San Diego Comic-Con. Major players, from Apple to HBO, spent millions of dollars on activations to promote their latest streaming service offerings and generate excitement. Disney took the stage to announce the next several years of Marvel Cinematic Universe content—showcasing its Disney+ shows alongside its tentpole films as equal quality entertainment. HBO rolled out the red carpet for its Game of Thrones spin-off, AMC showed off its Walking Dead spin-off, and practically every big player in streaming promoted or announced some new content to keep viewers engaged—and subscribed.

    What This Means for Advertisers

    The streaming service landscape can often feel like its own operatic TV show; heroes don’t stay on top for long, alliances and landscapes rapidly shift, and new key players are always arriving to upend the status quo. To keep up, advertisers need to stay ahead. Premier CTV platforms like MNTN Performance TV offer premium inventory – getting you seen on the biggest networks with the highest quality content—and diversify ad placements across those networks.

    By not placing all of your eggs in one basket, and by following your target audience—wherever they’re watching, regardless of the show—you can ensure that you’re always being associated with the hottest new shows and movies, regardless of who’s on top today or has the surprise hit show of tomorrow.

    But Wait, There’s More!

    Inflation isn’t just worrisome for streaming services— it can be troubling for marketers, too. After all, when times get tough, brand marketing budgets are the first to feel the sting. But it doesn’t have to be this way. Join MNTN and Ad Age for a complimentary webinar, Stand By Your Ad: Why CTV is Every Marketer’s Ally in Good Times and Bad, to get best practices for weathering economic downturns and see how you can use measurable ad channels to protect your ad budgets. Regardless of your industry, we have you covered for Q3-Q4. RSVP today.

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