How COVID-19 customer churn could impact Disney+, Apple TV+ and others

Apple TV+
Parks said that among new subscribers during the first quarter, 49% subscribed to Disney+ and 27% subscribed to Apple TV+. (Apple)

Coronavirus-related restrictions are lifting to varying degrees around the U.S. and it could impact streaming service subscriber totals as Americans are getting out more and watching less.

Parks Associates reports the churn rate for OTT services increased from 35% in the first quarter of 2019 to 41% in in the first quarter of 2020. The company said its research suggested that during the COVID-19 crisis, more than two in five U.S. broadband households trialed an OTT service, and 8% of households trialed four or more services.

"We are seeing a record number of consumers experiment with new OTT services as a result of the COVID-19 crisis and the shifts in strategy in the industry," said Steve Nason, research director at Parks Associates, in a statement. "OTT services are offering extended free trials to build up engagement, and 8% of US broadband households report they have subscribed to at least one new OTT service since the COVID-19 crisis began."

RELATED: Industry Voices—Nason: Are new services a threat to the ‘Big 3’ in OTT?

Parks said that among these new subscribers, 49% subscribed to Disney+ and 27% subscribed to Apple TV+. Going forward, the firm wondered whether subscribers will keep these services as fewer households shelter in place and the flow of original content slows down due to coronavirus-related production shutdowns.

"The industry is working on new hybrid content strategies as a result of production halts," Nason said. "Major players like AT&T for Warner Brothers and Comcast for Universal Studios are greatly concerned about the delays in content production on the launches of new services, like HBO Max and Peacock. Free trials will bring in new subscribers at the launch, and roughly seven in ten have subscribed to at least one OTT service they have trialed. OTT services need to be creative in building an engaging service, but during this time of heavy video consumption, OTT services have the opportunity like never before to win over new video consumers and retain them as long-term subscribers."

As Parks pointed out, the potential for elevated churn could impact Disney+ and Apple TV+. However, both of those services have conditions built in that could help mitigate churn. Apple has been giving away a free year of Apple TV+, which launched in November, to consumers who buy just about any Apple device. The company has also provided free access to the service for subscribers on the Apple Music Student Plan. Verizon subscribers received a free year of Disney+, which also launched in November, and recently Disney+ got rid of its seven-day free trial, ensuring that new subscribers will have the service for at least one month.

RELATED: Disney+ ditches seven-day free trial

As more subscription streaming services like HBO Max and Peacock reach the market, subscriber churn could become a more prevalent trend among price-conscious consumers. According to TiVo’s latest Video Trends report, 11% of broadband-only users and 21.6% of pay TV subscribers reported cutting an SVOD service within the last six months. Reasons cited include cost, content and account sharing.

“Significantly more broadband-only users cancel because they aren’t watching anything on their canceled subscription streaming service, while more pay TV users cancel because they intend to share an account with family or friends. This reinforces the trend of cash-strapped pay TV users making more decisions based on overall cost,” TiVo wrote.

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