Fifth of US broadband households cancel OTT service in last 12 months | Media Analysis | Business
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It’s not just pay-TV services that should worry about churn rate as research has revealed 19% of US broadband households have ended their over-the-top (OTT) video services over the last year.

Parks Chart Subscribers Cancelling OTT Service0According to Parks Associates’ OTT Video Market Tracker service, the overall churn rate for OTT services has been stable for the past year, with top services Netflix, Amazon and Hulu actually reducing their churn rates. At the end of 2015, 20% of US broadband households had cancelled at least one OTT video service in the past 12 months.

“The churn rate has held steady,” said Brett Sappington, senior director of research, Parks Associates. “These are not free trials, but instances where consumers are spending real money to try out new OTT services. One-third of households that currently subscribe to an OTT video service have cancelled one or more services in the past year, which shows that there is quite a bit of experimentation occurring right now.”

The OTT Video Market Tracker also found that households with OTT video subscriptions increased their spending from an average of $3.71 per month in 2012 to $7.95 in 2016. At the same time, spending on physical media purchases and rentals declined from an average of $15 per month to $8 per month, and spending on digital transactional video declined from an average of $2.42 per month to $1.42 per month.

“On average, spending on subscription OTT video services now accounts for 85% of all household spending on Internet video,” said Glenn Hower, senior analyst, Parks Associates. “The key to success in the long term will be retention. Consumers are experimenting with different OTT services, and many providers incorporate no-contract, cancel-anytime models to remove barriers to entry and to entice consumers to try new services free of obligations.”

Parks Associates notes that churn is lowest among the top three most established services (Netflix, Amazon and Hulu), and these providers are in a race to add new content and services or to match each other in new features to prevent any migration of their subscribers to a competitor. For example, Hulu recently announced it would offer its users the ability to download videos to watch offline, such as during a flight. Amazon began the trend for downloadable content in July 2016, and Netflix followed suit in November.

“These services have worked to establish core customer bases, and the inertia of these core groups provides an important baseline of ongoing revenues,” Sappington said. “They continue to refine or add to their offerings so that subscribers will continue to see new value in the service, providing ongoing reasons to remain a subscriber.”

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