Netflix, Hulu subscriber churn should be a concern for OTT providers, research firm says

Subscription video on demand providers need to keep an eye on the "extremely high" churn rates endemic to the OTT video market segment, a new report from Parks Associates has found. In the past 12 months, 7 percent of U.S. broadband households have cancelled their Hulu Plus subscriptions, a number that represents about half of Hulu's subscriber base.

Netflix (NASDAQ: NFLX) isn't immune to the subscriber decline either: the top SVOD provider saw about 4 percent of broadband households in the U.S. drop their subscriptions. That isn't a severe of a drop as Hulu's; the churn represents only about 9 percent of Netflix's subscriber base, Parks said.

Other OTT services are also showing high churn rates among their subscribers, the firm added.

"The high churn rate for many of these services suggests that consumers are holding onto their Netflix account while experimenting with the wide variety of other video subscription options," said Brett Sappington, director of research at Parks.

That's not necessarily a bad thing -- at least for consumers, Parks analyst Glenn Hower explained. "These video services are relatively low cost, so consumers can easily experiment with different services to find the ones that best suit their interests," he said in a release.

About 7 percent of broadband households subscribe to an online video services that aren't one of the big three -- Netflix, Amazon Prime (NASDAQ: AMZN) and Hulu.

Netflix is currently riding high following a record second quarter that saw its worldwide subscriber base climb above 65 million on net adds of 3.3 million subs. It also put in place a seven-to-one stock split in the wake of a meteoric rise in share price.

But some analysts are sounding a warning on Netflix's international interests, where the costs of expansion and currency fluctuations put a damper on its contribution margins in that segment. nScreenMedia analyst Colin Dixon also noted that Japan, where Netflix plans to launch the fall, will be a tough country to grow in.

Hulu, in the meantime, may be exploring more ways to attract and keep viewers. In addition to pursuing exclusive content deals and partnering with Showtime to enable subscribers to pick up the premium network's OTT offering, Hulu made its free content available as a dedicated channel on Pluto.TV. And Hulu is rumored to be looking into a higher-priced, ad-free subscription option.

Parks Associates tracked more than 75 OTT video services in the U.S. market over the past 12 months in compiling its report.

For more:
- see the release

Related articles:
Strong Netflix subscriber performance has investors cooing, analysts pushing estimates upward
Netflix challenges internationally and at home may highlight its Q2 report
WSJ: Hulu may include ad-free option to SVOD service for $12 or $14 per month

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