With stretched subscribers constraining fee increases, SVOD providers need other ways to grow revenue. Deloitte suggests influencers can help, but they could cost providers more than they make.
SVOD inflationary increases have become common
Now that the subscriber growth phase of the SVOD industry in the US, UK, and other countries is over, providers have focused on profits. For mainstream providers like Disney, the shift has resulted in big price increases and cuts in the content available. Disney+ viewers wishing to watch without ads have seen the monthly cost of the service increase from $7.99 monthly in late 2022 to $13.99 monthly in late 2023. At the same time, Disney has reduced the number of titles available and shifted to a curated model that focuses on library content rather than fewer new releases.
Consumers are ready to push back on big fee increases
Data from Deloitte suggests Disney may have pushed its new strategy as far as it can go without seriously impacting subscriber numbers. The average SVOD home is spending $61 monthly for four services. Moreover, 36% of Deloitte’s 3,517-person survey group believe the SVOD content they have access to isn’t worth the money. Almost half said they would cancel their favorite service if it increased prices by $5 monthly.
GenZ subscribers are even more price-sensitive, with 55% saying they would cancel.[i]
The message is clear for SVOD providers: above-inflation price increases and library trimming is not a recipe for long-term health. The practice has already increased churn rates. Antenna says that monthly churn rates have tripled since 2020 to 5.5% (which is equivalent to an annual churn rate of 90%!) If providers keep going, many more people are liable to leave.
If price increases are out, how else can SVOD boost revenue? They can attract new customers and get existing customers on ad-supported tiers to watch longer. Deloitte has a suggestion on how to do both.
Friends, family, social or otherwise, influence viewing
Despite the huge investment in search and discovery tools, friends and family are the most influential sources for movie and TV show recommendations. According to TiVo, 45% of US and Canadian adults say word of mouth/friends are their top discovery method. Commercials for shows work, too (43%), as does social media (37%.)
Deloitte suggests that social media influencers are particularly effective at pushing media. 59% of GenZ consumers said they often watch TV shows or movies on streaming video services after hearing about them from creators online. However, influencers’ impact isn’t limited to the young. Half of Millennials, 30% of Gen X, and 18% of Boomers and matures say they follow influencer recommendations, too.
Given the importance of influencer recommendations, Deloitte suggests that SVOD services include them in their marketing campaigns. The data certainly suggests that it could help existing service subscribers find more content to watch and, if subscribed to an ad-supported tier, generate more ad revenue. However, there is a risk in recruiting new subscribers via influencers.
Risks of working with influencers
Influencers have the most impact on the young, but they also have the highest churn risk. 52% of Gen Z and 54% of Millennials had canceled an SVOD service in the six months before participating in the Deloitte study. 43% of Gen X and 21% of Boomer consumers said the same. In other words, the young are likelier to watch the show the influencer recommends and immediately cancel the service.
Of course, there is value in exposing consumers to the service. They may come back when another show or subscription offer catches their eye. For example, Deloitte says 31% of Millennials and Gen Z consumers returned to a service within six months of canceling it. But making money from frequent churners is hard, and here’s why.
If it costs $20 in marketing to win each subscriber (the subscriber acquisition cost, or SAC) and they only pay for one month at $7.99, the service provider loses $12 on every customer win![ii]
It is very important to fish in the right pond when looking for new customers. If you want prospects more likely to subscribe and stay with your service, influencers might not be the way to find them!
[i] Far fewer people follow through on service cancelation if the proposed event happens. However, the number of people saying they will cancel is unusually high.
[ii] Deloitte’s estimates suggest SAC could be more like $100 per new subscriber.
