OTT service cancellation rates holding at 18%, Parks Associates says

Netflix remote control image
Netflix is one of the U.S. OTT services with a stable rate of cancellation by subscribers. (Pixabay/Creative Commons CC0)

The rate of cancellation for OTT services has held steady at around 18% for the past three years, according to new research from Parks Associates.

The firm said the average subscription length for OTT video services is 30 months overall, but Netflix, Amazon, and Hulu hog up most of the stability and leave other services to deal with more volatile churn rates.

“With OTT service penetration starting to plateau at around 65% adoption among U.S. broadband households, the OTT video market is reaching a level of saturation for the services currently available to consumers,” said Hunter Sappington, research analyst at Parks, in a statement. “In an increasingly crowded and competitive marketplace where subscriber acquisition costs are high, this plateau highlights the need for services to focus on retention rather than solely acquisition. Successful services can encourage retention in several ways, such as community building, continuously offering new and fresh content, and improving their user experience.”

RELATED: Parks Associates: 40% of U.S. households have at least two OTT services

Parks’ numbers on cancellation rates arrive as Netflix is experiencing a relative slowdown in growth. During the most recent quarter, Netflix still added 5.2 million subscribers but that number was 1 million fewer than the company had projected.

Digiday cited polls by Ampere indicating that up to 25% of U.S. subscribers have a high intention of churning within six months.

But despite the impact cancellation rates have on individual OTT services, the space is forecast to keep growing and is already winning over the vast majority of at least one demographic.

According to Parks, more than 85% of U.S. millennials subscribe to at least one OTT video service. The firm also said that by 2022, more than 265 million households worldwide will have more than 400 million OTT video service subscriptions.