While SVOD platforms like Netflix (NASDAQ: NFLX), Hulu and Amazon Prime Instant Video have been lauded for easy, immediate customer sign-up processes, the fact that exiting these services is just as convenient results in churn that is significantly higher than what is found in pay-TV.
"SVOD households generally churn at a higher rate than multi-channel video programming distributor (cable TV) households," wrote BMO Capital Markets analyst Daniel Salmon. "We expect this is in part due to SVOD services' generally non-restrictive cancellation policies."
Culling Nielsen data, BMO Capital found that, surveying over a three-month span, 99 percent of cable customers still had their service in place after a 90-day period. But 5 percent to 7 percent of SVOD users had ditched their streaming service.
Of course, understanding the dynamic of customer interaction with SVOD service providers is crucial to a pay-TV industry that is now forced to grapple with these platforms in order to keep subscriber bases intact.
According to Nielsen, 41 percent of U.S. households now subscribe to a streaming service, up from 36 percent in just one year.
Meanwhile, 10 percent of persons age 18-34 use only OTT programming services.
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