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Is Inflation Causing OTT Churn?

Have recent inflationary issues been driving an increase in OTT churn, or is inflation just one of several different factors influencing subscriber cancellations? Rob Dillon, Head of Digital Product, Straight Arrow News, asks Paul Erickson, Research Director, Entertainment, Parks Associates, whether Free Ad-Supported TV (FAST) services are increasing the churn in the Subscription Video on Demand (SVOD) market. “Is that really true?” Dillon says. “Is it directly responsible, indirectly responsible, or is it not even in the same arena?”

“I think it's very indirectly responsible,” Erickson says. “You know, you had FAST services and Advertising-Based Video on Demand (AVOD) and ad-supported already being increasingly adopted by the population in general. I think that's only accelerated given inflationary pressures and increased cost sensitivity that consumers are experiencing now.” He emphasizes that the SVOD market was already experiencing a slowdown due to saturation and competition previous to inflationary pressures. “We need to face a future where it's just a reality that there's going to be a mix of business models going forward and they're going to serve different customer needs in terms of what they can afford…certainly having a mix of free and paid is going to be the reality of the future.”

Kumar Subramanian, CEO, MediaMelon, generally agrees with Erickson and he highlights that OTT platforms are beginning to diversify their types of service offerings out of an understanding that users are ultimately looking for variety and flexibility of options in this current economy. He mentions Paramount Plus as a primary example. “They have all kinds of services,” he says. “From their perspective, I think it's a combination of different channels and different ways to touch the consumer that is important.” Regarding the possibility of FAST increasing churn in the SVOD market, he thinks that may be happening to some extent, but he says, “The correlation is not that strong in my view.”

Ravi Singh, Director of Streaming Platforms, Knowledge Network says, “I think for me, the jury's still out on whether [FAST] is going kill SVOD…but I think where the challenges are is in the traditional cable pay services. I was just reading a statistic that the average American spends $2,600 a year on pay cable services and included in that is a $450 charge for the set-top box rental.” Due to this, he believes that FAST may more directly impact the cable pay service market because in this current inflationary environment, “Consumers are far more sensitive.”

Learn more about OTT churn at Streaming Media West 2022.

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