Over 350 streaming services have been tracked in North America alone, according to data from research firm Parks Associates – a vastly different market from digital video’s origins in 2007.
“The sheer number of services and [business] models is really staggering to keep up with,” Elizabeth Parks, president of Parks Associates, said during Wednesday’s webinar.
While it’s highly unlikely that any one customer has streaming subscriptions reaching triple digits, viewers are still trying to trim down how many platforms they’re paying for. This doesn’t mean people are abandoning digital entertainment. Instead, viewers are migrating to ad-supported streaming services.
In its State of the Market: Streaming Video Services report, Parks Associates said in the past month, 31% of U.S. households reported watching an ad-supported video on demand or a free ad-supported streaming service – a 13% increase from 2018. In addition, 41 million U.S. households are expected to watch ad-based over-the-top (OTT) video services like Tubi, Freevee, and Pluto TV.
“As an industry, we are now entering a new phase of streaming characterized by evolving business models aimed at enhancing profitability,” Parks said.
The problem with profitability
A majority of streamers are currently struggling with profitability. Streaming services saw a massive influx of users in 2020 when most of the world was indoors. Reports said that many Americans were paying for up to six streaming services. Since then, numbers have mostly returned to pre-pandemic with Americans paying for about three or four subscriptions.
The firm previously reported that monthly spending on streaming subscriptions has declined 25% from $90 in 2021 to $73 in 2023.
In addition, inflation has risen over the last three years and has put studios between a rock and a hard place. Services must find a way to maintain increasingly budget-minded customers while raising subscription fees to remain operational.
Unsubscribing from a streaming service isn’t always permanent. Data shows a whopping 90% of users returned to the terminated service within a year of cancellation. The returning viewers said discounts and new content were big attractors for users.
Churn, or the rate of cancellations, has risen across the board, but according to Parks, churn is natural with a 47% annualized rate. Churn is often the result of households wanting to save money. The instinct for consumers to tighten their belts in uncertain economic conditions has resulted in the greater migration to ad-supported and freemium services.
Having too many options is another issue for viewers. The amount of time someone spends trying to find something to watch is correlated to churn rates, according to Eric Sorensen, Parks Associates streaming video editor.
“Services have to look at ‘how do I make the discovery process a lot easier, a lot simpler’ and provide [viewers] a reason to stick around,” Sorensen said during the presentation. “If I’m going to spend 20 minutes looking for something [to watch], that’s the 20 minutes I had to watch.”
In short, consolidation is key, and it’s already happening. According to reports, Paramount plans to continue to license content beyond its own channels. So far, the media company has found a new home in Netflix to revive its recently canceled Star Trek: Prodigy series. In August, Star Trek: Strange New Worlds made the leap to CBS in limited form. The upcoming Frasier reboot will also air on CBS after originally premiering on Paramount+, Paramount’s streaming service.
Parks Associates aren’t the only ones pointing towards consolidation as a potential solution for companies, viewers and advertisers. In its Video Trends report, TiVo said a blend of the different types of services is the best option.
“This new [subscription video on demand services and ad-supported video on demand] hybrid structure allows users to consolidate their subscriptions, cut costs and still watch the same or more amount of content,” the report said.