Pay TV and Cable Lost 5.8M Subscribers in 2022
by Frankie Karrer
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Streaming channels are rethinking how they maintain subscribers heading into 2023
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What do Mike Myers and Nancy Meyers have in common? Streaming channels are hoping both will be a draw to viewers who are constantly evaluating their roster of subscriptions based on the content they are currently binging. The streaming world has seen quite a few shake-ups over the past year, from publisher mergers to new ad tiers, and streaming networks are reevaluating how best to engage users. It only promises to be more interesting heading into 2023 as most of the major players in the space have announced an ad-supported tier to help attract subscribers and boost revenue numbers. They aren’t waiting on their New Year’s Resolutions, however. They’re getting in the spooky spirit, drawing both subscribers and advertisers with an array of content heading into the most shoppable time of the year.
As streaming channels grapple with bringing in and engaging new customers, they are taking advantage of spooky season, investing heavily in Halloween. Hulu has (literally) already made a name for itself around the holiday, offering advertisers a chance to align with their collection of festive content dubbed “Huluween.” This event marks the biggest of the year according to their Vice President and Head of Marketing, Scott Donaton. Peacock is also cashing in on the holiday, promoting their third title in the Halloween revival trilogy, “Halloween Ends.” The second title in the series resulted in peak performance for the channel in 2021 and Peacock is hoping the final film will pack the same punch. The consumer demand for seasonal content is perhaps best demonstrated by AMC’s streaming service Shudder, a channel that aligns itself with all things dark and twisted throughout the year. Even though they’ve carved out this niche, they still see subscriptions grow in the lead-up to All Hallows’ Eve.
Halloween is perfectly positioned for advertisers. It’s a content-heavy season with an almost cult-like worship of favorite films. Disney+’s “Hocus Pocus 2” demonstrated the fandom of nostalgic viewers, claiming the title of top-performing release for the channel based on viewership hours within the first three days of release. Within the calendar year, it is also perfectly positioned ahead of the holiday shopping season. Retailers are responding to shoppers’ desires to shop early and save, starting their Black Friday deals long before the day itself. Halloween gives advertisers an event to surround during their shifting promotional approach.
For the streaming channels, Halloween represents another tactic they are taking to try to generate stickiness in subscribers. Halloween content may get users in the door, but streaming channels are hoping they stay past the end of October to explore the rest of their extensive libraries. Channels are still experimenting with the best way to keep viewers from churning out of their service amid the ever-changing streaming landscape. The industry will likely see even more changes in 2023, the first year with comprehensive ad solutions from most of the top players.
After much speculation, Netflix released the details of their ad-tier plan. The newest subscription option will be available within the US on November 3rd and cost $6.99. Viewers who select this option will still have access to Netflix’s extensive library of content; however, they will see four to five minutes of ads per hour across movies and TV and be limited to a lower-quality session of 720p (compared to that of their highest ad-free tier).
Netflix announced that they were working on an ad-supported tier, something they had previously been adamantly against, after less-than-stellar earnings reports and their first dip in subscribers since their launch. Rumors swirled for months about what partner they would select to manage the ad inventory and how much it would cost advertisers to participate.
Despite the doubts about whether this was enough to reverse the downturn, positive signs abound. Advertising inventory is almost sold out for the initial launch with several hundred brands already signed up, indicating that advertisers are jumping at the opportunity to align with Netflix’s premium content that was previously unavailable to them. On Tuesday, Netflix’s earnings report showed that the subscriber loss has also been quelled, reporting that they had signed up an additional 2.4M subscribers in the third quarter and are anticipating adding another 4.5M in Q4, including those opting into the ad tier.
Mark Douglas, MNTN’s CEO, joined CNBC ahead of the earnings call to share his predictions about Netflix’s future. “The thing to think about with Netflix is that their problems are on another scale. Their problems are opportunities for the business–they’re the problems that every other streaming service would love to have. They have 100M people using the service that are not yet paying for it–a huge opportunity. They have all these people watching–over a quarter of a billion people watching–that now they can bring ads into. So I think it’s almost not about subscriber growth, it’s seeing them monetize these things that were treated as problems early this year and now everyone’s realizing a big opportunity.”
Netflix isn’t alone in looking to reexamine their business models and take steps to keep subscribers engaged (and paying!). Streamers have shown a willingness to chop and change their subscriptions. A majority of streamers pay for multiple subscriptions and with more services continuing to roll out, they can often find their monthly viewing expenses creeping up to the price point of a cable subscription, which they cut the cord to avoid. Research has shown that a large number of viewers will churn out of a service after binging a show, only to return when there is another title they would like to watch. This selective viewing makes it hard for streaming channels to maintain their audience growth and is a challenge all channels are facing.
Many channels have opted to continue to feed the content machine. Netflix spends billions on original content each year, ensuring there is always something new to engage viewers. Disney recently stated that despite the multi-billion dollar investment they’ve put into their original content, they’ve seriously underestimated how much it would take to keep rolling out new shows and movies at the rate they would like. This constant content cycling is an incredibly expensive and likely unsustainable way to maintain viewership numbers.
Lower-priced ad-supported tiers for streaming services have clearly become an important factor for channels looking to grow viewership numbers and bring in additional revenue. Disney+ and Netflix announced their new ad-supported tiers this year and rumors continue to swirl that Apple TV+ isn’t far behind them. Not only do these tiers provide an entry point to those that weren’t willing to spend the original subscription prices, but they also offer a lower-priced option for those feeling the weight of their subscriptions on their monthly credit card bill. They also can increase the value of the viewers they are bringing in, as the streaming channel now generates revenue from the subscription cost, as well as from the ads the viewers are watching. “Traditionally, Netflix likes that subscription tier, but the growth is clearly going to come from ads,” MNTN’s Douglas predicted in his CNBC interview.
The effects remain to be seen, but the lower price may work to keep churn at bay. While a consumer may be highly motivated to closely manage their $20+ subscription, canceling after finishing a binge of their favorite show, a $7 price tag may not be worth the effort of canceling in hopes for a new season or new premiere of something good in the near future. Netflix even strategically undercut Disney+’s announced ad-tier price by a dollar, making them look like a better value than their competitor.
The streaming landscape has continued to change, from viewers cutting the cord to take advantage of the content and prices on streaming to the great rebundling as parent companies, realizing the value of these platforms, brought their IP under one umbrella. Now the services are adjusting their business models to include ads where there previously weren’t, allowing brands access to the premium content they’ve wanted to align with and subscribers the ability to continue streaming for a reduced monthly fee. They are hoping to engage their viewers and reduce churn, while of course making more money in the process.