More than 1.5 million people cancelled streaming platform memberships in the first couple of months of 2022, as the cost of living crunch closes in on entertainment.
A new report from market research firm Kantar found that the number of people subscribing to at least one video streamer like Netflix and Amazon Prime in the UK had plunged in the first quarter of 2022.
The dip comes after the pandemic lockdown boom, which saw households sign up to a number of different services, including the newer players like Disney+, which made its UK launch in late 2019.
“Wanting to save money” was cited as a key reason why people pulled the plug on memberships, and people were “starting to seriously prioritise where and how their disposable income is spent”.
Kantar also revealed that the proportion of people planning to cancel surged from 29 per cent to 38 per cent in the final months of 2021.
Whilst the market is notoriously saturated, Kantar said “churn” rates were higher with less popular streamers, whilst Netflix and Amazon has become more staple for UK homes and less likely to face cancellation.
Analyst at Enders Analysis Tom Standen-Jewell told City A.M. that whilst streaming services had previously benefited from the public perception of being a value for money alternative to pay TV, like Sky and Virgin Media, he said there was “a perfect storm” brewing of price rises for the major services as well as the cost of living crisis.
Standen-Jewell added that this made the amount of money leaving people’s accounts more “noticeable” than it may have been before.
“The cost of streaming therefore looks increasingly like a luxury that can be cancelled when times are tough.”
Having said this, the position of Enders Analysis is that households will continue to have some form of video streaming, even if that is just reduced to one.
Despite Netflix retaining its position as the most popular streamer, immense scrutiny remains on how many new subscribers it can both obtain and maintain. This has become harder as the world opens up and more players enter the market.
Beyond this, the stock appears to have lost its pandemic glow, witnessing a mighty tumble and losing half its value since a November 2021 peak.
The option for platforms like Netflix could be advertising: something that the likes of Netflix have been historically reluctant to do.
Nonetheless, the tide could be changing for this, with Netflix CFO Spencer Neumann stating last month that “it’s not like we have religion against advertising”.
On this, Ryan Cook, UK managing director of Criteo said: “For marketers, it’s a great opportunity to engage with highly valuable audiences and what’s more, if done right, advertising in this environment can also enrich the user experience.”
Netflix will publish a trading update overnight, with analysts expecting steady subscriber growth particularly amongst increasingly important international markets.