Paying less for streaming versus traditional TV services has long been a driver of cord cutting, but new NPD survey data shows price sensitivity is increasing among streaming users and becoming top of mind when deciding to cancel an SVOD. That said, content remains key in driving SVOD sign-ups – particularly for younger viewers, according to The NPD Group.
From October 2021 to April 2022 cost jumped up two spots as the reason cited by U.S. consumers for canceling a subscription video on-demand (SVOD) service, going from No. 4 to now the No. 2 factor. John Buffone, executive director and industry analyst at NPD, suggested that part of the consumer shift could be tied to inflation as people have seen increased prices across many industries, including streaming.
“In the last several months consumers have had to navigate rising prices in many facets of their lives and SVOD services are part of that mix with companies like Netflix and Amazon raising their subscription rates,” said Buffone. “While cost considerations in SVOD services are still dramatically lower than in cable and satellite TV, it is important for providers to recognize that price sensitivity is growing so they can adjust their offerings to retain their subscriber base.”
Netflix raised prices in January for new and existing U.S. subscribers while Amazon implemented a price increase for new subscribers in February and all existing Prime memberships a month later. Greater concern over SVOD prices comes as Netflix and Disney+ plan to introduce lower-cost ad-supported tiers this year, though pricing, structure and other details haven’t been disclosed.
NPD’s Connected Intelligence TV Service Switching Study is based on a consumer survey of more than 5,000 U.S. adults conducted April 5-21.
Promos, free trials have heavier influence
With consumers more wary about costs, it might not be surprising that NPD found promos and free trials are playing a bigger role in driving SVOD sign-ups as of April.
During the survey period, the top reason people cited for signing up for an SVOD service was because it offered a free trial. Promos and discounts are also having a greater influence on where consumers prefer to sign-up, such as direct from a provider. It jumped four spots since October, with discounts and promos now cited as the No. 1 reason driving users’ preferred signup method among viewers who are extremely or very likely to subscribe to an SVOD service in the next six months.
While price and promos are making more of an impact on consumers’ decision to cancel or get started with a streaming service, NPD also found that must-have content continues to be a big factor driving subscription choices.
One-third of SVOD users reported signing up for a service because they knew it had a specific TV show or movie – marking a 3% increase from six months ago from 30% to 33%. This trend was driven by younger viewers aged 18-34 years, with a 6% increase since October of those citing content driving signups.
An earlier report from MoffettNathanson highlighted that saving money with streaming was decreasing in importance as a driver for cord cutting, while content has started playing a larger role.
The April report found that pay TV being too expensive was still the top reason consumers left traditional TV services for streaming – but cost as the primary concern fueling cord cutting dropped notably in the last few years, while access to content became an increasing part of the equation. The firm’s Q1 2022 U.S. SVOD tracker said the second most important driver of cord cutting was “all the shows I currently watch are available on streaming services.”
And content continues to play a role for retention as well. The number one reason for canceling an SVOD service, according to NPD’s survey, is “I’m not watching as much as before” – which was also the top reason six months ago.
Overall, the NPD survey results indicate U.S. viewers are weighing the pros and cons of both price and programming when it comes to keeping or ditching SVOD services.
“Consumers are creating a value equation to determine what services they ‘need’ versus those they cancel, especially as they return to experiential activities,” commented Buffone. “For some consumers ad supported tiers can be a way to cut costs without losing access to content. As we look to the future – including potential AVOD offerings from Netflix and Disney – understanding the differing consumer value propositions will be key in determining tier structure and pricing strategies.”
Those that do pay for a commercial-free experience appear to engage with SVOD services more often, with 28% of survey respondents saying they use the service every or most days, compared to 20% of ad-supported subscribers who said the same.