Advanced Television

Research: 85% US homes have SVoD

January 26, 2022

Entertainment on Demand, the solution measuring streaming service subscription levels, has revealed subscriber behaviours in the US for the fourth quarter of 2021.

The proportion of US households who have a video subscription has risen to 85 per cent (up 2 per cent points QoQ, and up 2 per cent points YoY), after two consecutive quarters of decline. This means there are now 109.4 million households with subscriptions, as of December 2021.

Additional findings include:

  • Video streaming QoQ penetration growth is primarily coming from FAST and AVoD tiers with FAST growing 4.9 per cent points, AVoD 3.6 per cent points, and SVoD 1.8 per cent points QoQ.
  • Livestream also grew by 0.7 per cent points and is now present in 10 per cent of US households. MVPD+ is now the size of FAST as of Q4 ’20.
  • 9 per cent of US households accessed a new service in Q4 ’21, up from 8 per cent in Q3 ’21.
  • Amazon Prime Video is the #1 destination for new SVoD subscribers for the third consecutive quarter, but its share is down 4 per cent points QoQ.
  • Netflix subscriber base is now below 2/3 of US subscribers, as penetration continues to decline QoQ by 0.5 per cent pts, despite the success of Squid Games. This is a decline of 5 per cent points YoY.
  • Stacking continues to grow among current streamers. The average household now uses 4.7 services on average.
  • With the success of Yellowstone, the topmost enjoyed and recommended content in Q4 2021, Paramount+ gains share of new users (now at 8 per cent of all new streaming). Peacock, which has the back catalogue to Yellowstone, also benefited in the AVoD and FAST space.
  • Apple TV+, which saw growth due to Ted Lasso in Q3 and Q4 ’21, is now facing higher planned cancellation going into Q1 ’22 due to being reliant on a single title to drive engagement.
  • As FAST (Free Ad-Supported TV) drives growth of streaming, users are expecting more from their free services, with original content and quality of shows increasingly driving sign up.
  • Q1 ‘22 can expect to see more fluctuation of subscribers as stacking continues to grow and planned cancellation is up across the board. Streamers feel they can get better quality content from FAST than before, which may have negative implications for paid streaming. As the US passes the next wave of Covid, overall streaming screen time may start to decline.

FAST Gaining Speed

Some 18 per cent of US households now use a FAST service as of Q4 ’21. This has over doubled YoY when household penetration was 8 per cent in Q4 ‘20. In the last quarter alone, FAST penetration increased 4.9 per cent points, making it the fastest growing streaming tier. It is now nearly the size of AVoD, which has a household penetration of 24 per cent. Within FAST, Peacock, IMDB TV, Tubi, and Roku Channel account for the greatest share of new users in Q4 ’21, collectively making up 79 per cent of all new FAST users this quarter.

In Q3 ‘21, ease of use and price helped lower the barriers to using a FAST service for the first time, but as FAST gains in popularity, viewers are becoming more demanding. Amount of original content, quality of shows available, and value for money are all increasingly driving sign up. Meanwhile, the variety of classic films available, which the FAST tier over-indexes in, is losing share of sign up drivers. In addition, signing up for specific content now only accounts for 13 per cent of new sign ups/uses, down from 20 per cent in Q4 ’20. This indicates consumers expect a wider range and catalogue of content to choose from within their FAST services.

These expectations are being driven by FAST platforms meeting these needs. Satisfaction in both amount of original content and quality of shows are up significantly in Q4 ’21 compared to Q3 ’21. Ease of use and value are still the number one and number two drivers of satisfaction, but we can expect FAST users to increasingly expect more beyond a navigable interface in order to stay engaged. For example, 25 per cent of Roku subscribers are satisfied with the amount of original content, the highest of any FAST platform; and 19 per cent are satisfied with the number of new release films, in line with paid competitors Amazon Prime Video and Hulu.

With content moving to the forefront of FAST, NPS of overall FAST is up 3 points QoQ to 32. It is the only tier to see an improvement of NPS in Q4 ’21 and only tier not to see an increase in planned cancellations going into Q1 ’22. In overall streaming, watching without ads is a declining driver of sign up, signaling ad-based platforms will continue to benefit. If FAST continues this content forward approach, expect the category to chip away at screen time of paid competitors and potentially even drive churn of paid competitors.

Case Study: Peacock

In total streaming, Peacock moved into the #2 position of new sign ups in Q4 ’21. It accounted for 10 per cent of all new sign ups, bringing its household penetration to 12 per cent, up from 9 per cent in Q3 ’21. Peacock is heavily reliant on its ad-based tiers to bring in new users, with 56 per cent of new users coming in through FAST, 26 per cent through AVoD, and 15 per cent through SVoD. However, paid tiers are making up a higher proportion of overall streamers, with FAST’s share declining 6 per cent points YoY. This indicates Peacock is finding success in bringing in new users through FAST and trading them up to AVoD or SVoD tiers.

This success is coming from the satisfaction they provide at the paid tiers. While total SVoD NPS was flat QoQ, Peacock’s rose 10 points to 47, bringing it above the market average of 46. Peacock’s AVoD NPS rose 4 points QoQ while total AVoD NPS declined 1 point. Viewers are finding value in the these more expensive tiers.

This improvement in satisfaction is being driven by content. Share of streamers saying they are satisfied due to amount of original content, number of new release films, and quality of shows are growing. Peacock users who are satisfied with the amount of original content are up 12 per cent points YoY, number of new release films up 6 per cent YoY, and quality of shows up 7 per cent points YoY.

However, it’s specific content that’s most likely to bring in new users (over 1 in 3 new sign ups), particularly Halloween Kills, Yellowstone and The Office in Q4 ’21. Peacock over-indexes in TV adverts as a key touchpoint for sign up. Both Yellowstone and The Office had featured ads from Peacock, highlighting the impact of paid traditional advertising. However, this movement from signing up for specific content to being satisfied with amount/quality of content indicates Peacock is finding further success keeping users engaged after initial sign up and trying new content.

With growth in satisfaction with content, Peacock SVoD saw the most significant improvement in planned cancellation in the next 3 months. Now only 5.5 per cent of SVoD subscribers plan on cancelling in the next quarter, down from 13.2 per cent in Q3 ’21.

Peacock’s multi-tier strategy is bringing in new users, and their efforts to drive engagement with new content is driving satisfaction and tier trade-ups.

Fall out from Sports:

Live streaming sports is still relatively new in the streaming world. Even in Q4 ’21, only a handful of platforms livestream sports, and most have exclusivity with certain sports and leagues. With most sports still being watched on live TV, sports content is not a growing driver of sign up for the platforms that do offer sports. There are fluctuations, for example with Peacock aired the Olympics in Q2 ’21, but on average it is not accounting for more sign ups.

This does not mean sports are not important to engagement. Among those who plan to cancel any of their subscriptions or services in Q1 ’22, 9 per cent of them claim it’s because there’s not enough sports events or matches. This has steadily trended upwards over the last year, when in Q4 ’20 only 5 per cent said they planned to cancel due to lack of sports. Looking at actual cancellations, 6 per cent said they cancelled a subscription or service in Q4 ’21 due to there not being enough sprots events or matches. This is up 3 per cent points YoY.

On the other end of the spectrum, 5 per cent of streamers said they were satisfied with sports events/matches in Q4 ‘21, the highest it’s been in the last year. Although small, it is consistently growing quarter over quarter, and is one genre to consider to drive continued engagement with a platform.

Watch out for Future Churn:

Average planned cancellation is up in Q4 ’21 compared to Q3 ’21. Most significantly it is up for platforms that were reliant on a single title to bring in new users. For example, after the success of Ted Lasso in both Q3 and Q4 ’21, 19 per cent of Apple TV+ users say they plan to cancel their subscription in Q1 ’22. Similarly, HBO Max, whose top content driving sign up in Q4 ’21 was Dune, has a planned cancellation rate of 7 per cent, up 2 per cent points QoQ. Both samples indicate what can happen if you are reliant on a single series or film title to bring in new subscribers. As demonstrated by Peacock, it’s critical to keep users engaged after consuming the title that drove sign up in order to reduce churn.

Beyond keeping engagement beyond a single title, platforms, especially paid platforms, now have to provide a holistically appealing experience that covers content and interface. As FAST platforms move in on the content space, paid platforms will have to provide points of differentiation to prove value. In the SVoD tier, elements such as the ease/quality of search and ability to download content are growing areas of satisfaction, accounting for 19 per cent and 7 per cent of subscriptions respectively. TV interface is a growing area of dissatisfaction within SVoD, accounting for 6 per cent of subscriptions. These three areas highlight specific things platforms can work to improve in order to drive engagement and reduce churn.

The growth of FAST and AVoD also indicate the growing need for a multi-tiered strategy. For example, Hulu (+2 per cent point HH penetration QoQ), HBO Max (+2.1 per cent points), and Peacock (+2.6 per cent points) all improved satisfaction in both content and user experience, but also all have a multi-tiered strategy. If you can bring in viewers through an AVoD or FAST tier with content, you can trade them up and keep them satisfied with an exceptional user experience.

Categories: Articles, Markets, Premium, Research, VOD

Tags: , , , , , , , , , , , , , , ,