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Analyst: High churn for Netflix and other OTT services

Findings from market research and consulting company Parks Associates suggest that annual churn rates for OTT entertainment services Netflix, Hulu Plus, and Amazon Prime are a sign of consumers testing new video services.

The firm’s OTT Video Market Tracker reveals high churn rates for many OTT video subscriber services. In the past 12 months, 4 per cent of US broadband households have cancelled their Netflix service, representing nearly 9 per cent of Netflix’s current subscriber base. By comparison, 7 per cent have cancelled their Hulu Plus subscription within the past 12 months, a figure that represents approximately one-half of Hulu Plus’s current subscriber base.

As a group, smaller OTT video services have extremely high churn rates as well. Seven per cent of US broadband households subscribe to an online video service other than Hulu, Amazon Instant Video, or Netflix. The number of people cancelling one or more of these services over the past year represents 60 per cent of those who subscribe currently.

“Through the OTT Video Market Tracker service, we are tracking the details and trends of over 75 OTT video services active in the US market along with another dozen or so services planning to enter the market within the next few months,” said Brett Sappington, Director, Research, Parks Associates. “The high churn rate for many of these services suggests that consumers are holding onto their Netflix account while experimenting with the wide variety of other video subscription options.”

“Consumers will go where necessary to get the video content that they want,” said Glenn Hower, Research Analyst, Parks Associates. “These video services are relatively low cost, so consumers can easily experiment with different services to find the ones that best suit their interests. At the same time, they can quickly consume the most interesting content within a service and move on.”

Currently, 85 per cent of U.S. broadband households subscribe to a pay-TV service, and 59 per cent of US broadband households access an OTT video subscription. Of those who use OTT video, just under 50 per cent use two or more services.

“To shed a number of subscribers equal to half or more of your current subscriber base is a huge problem,” Sappington suggested. “Customer acquisition costs for an OTT subscription service are relatively low, particularly compared to pay-TV, but OTT video services will eventually have to capture and retain their customer bases over time in order to survive in the long term.” he warned.

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