New data shows that most streaming service customers think their services are worth what they pay. But Disney Plus’ service value is being eroded in three key ways: cost, price rises, and library size. Subscriber cancelations are sure to follow.
Most people are happy with the value of the streaming services
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The good news for SVOD providers is that most users are happy with the value the services are delivering. Aluma Connected Media Insight’s survey of 1,789 adult US SVOD users found that 77% agreed with the statement, “Most streaming services are worth the price you pay.” Moreover, two-thirds or more did not agree that it is difficult to find something interesting to watch or that there was not enough content to keep them around for long.
Price a key arbiter of value
New Hub Entertainment Research data shows that price is the most important attribute when a user evaluates service value. Hub’s June 2023 survey of 1,602 US broadband consumers shows that low price was selected 107% more than the average response. A large library, all-seasons availability, and ad-free viewing were also selected more than average.
The Hub data also suggests SVOD services could take a leaf out of traditional pay TV’s playbook. Providers like Dish Network and Comcast often guarantee no price increases for a period when a user signs up for service. Most SVOD services provide no such promise. Hub’s data shows that offering a price guarantee would considerably improve the perceived value of service and presumably help reduce churn.
Churn looks to remain high
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Aluma found that a third of respondents agreed that streaming services were too expensive for them to keep for more than a few months. Clearly, among that group, churn is liable to be much higher than among respondents that did not agree.
And a survey of 1,000 US adults by DirecTV seems in line with this finding. It found that 22% had canceled a streaming video service in the previous three months. And among those that had canceled service, the top three reasons for doing so were closely related to cost. 35% said the time spent with the service didn’t justify the cost, 30% wanted to cut back on entertainment spending, and 25% said the service raised prices.
Interestingly, Hub found that the group most likely to churn had the greatest number of services. On average, 42% said they had canceled a new subscription in the previous six months. But 45% of those with four or more services said the same.
Disney+ and others are willing to accept high churn to become profitable
While the Aluma data shows that SVOD subscribers are relatively happy with the value offered by their streaming TV services, some SVOD providers are hell-bent on undermining their value.
Disney+’s library has been getting smaller, with the service removing titles. Most subscribers also saw a steep price increase when the company introduced its ad tier last November. To continue to watch without ads, subscribers had to pay 40% more, and almost two-thirds opted to continue to watch ad-free.
Finally, the desire for price guarantees so evident in the Hub data seems unlikely to happen anytime soon with Disney+. During Disney’s Q2 2023 earning call, the company’s CEO, Bob Iger, made this comment when questioned about future price increases:
“We were pleasantly surprised that the loss of subs due to what was a substantial increase in pricing for the non-ad-supported Disney+ product was de minimis. It was some loss, but it was relatively small. That leads us to believe that we, in fact, have pricing elasticity.”
Mr. Iger couldn’t have been clearer: ad-free Disney+ subscribers will be asked to pay more. He will continue to push the price until the “elasticity” evaporates, and churn starts to increase. So, with the company increasing subscriber fees, cutting library size, and refusing to provide price guarantees, the value will suffer, and churn will increase.
Why is Mr. Iger being so reckless with the value of his flagship service? He has committed to making all direct-to-consumer services profitable by 2024. He is clearly willing to risk substantial subscriber losses to get there.
