Streaming companies continue to lose the fight against streaming giant Netflix, which is currently dominating the industry as seen in its recent Q4 2023 financial results.
In its fourth-quarter financial results, the number of Netflix subscribers shot up to 260 million. However, the same growth is not being seen with competitors Hulu and Disney+ according to a report by Antenna.
Over the past 17 years, since Netflix entered the streaming industry, only three video subscription services in the US have managed to turn a profit. Netflix was among the first entrants into the streaming revolution before being joined by Netflix and Hulu. More traditional entertainment giants such as Warner Bros. Discovery are also entering the industry.
Streaming Platforms Struggle to Sustain Subscriber Numbers
Over the past few years, streaming platforms have performed poorly in maintaining subscribers. The challenge comes despite an increase in the number of people looking for streaming services.
Within four years, the weighted average churn rate for streamers in the United States has increased. To 5.5% according to Antenna. In 2023 alone, the number of new subscriptions to streaming service providers grossed 164.7 million. While the number of cancellations was at 140 million subscribers.
Going by this statistic, the number of new subscribers to streaming sites was around 24 million. A big chunk of these new users went towards streaming giant Netflix, which has become a darling among subscribers because of its cheaper advertising tier.
Besides struggling to acquire new subscribers, streaming sites are also struggling to sustain their numbers. A high subscription cost at a time when the economic climate is not performing well has forced many users to cancel their subscriptions.
In 2023, the gross subscriptions to streaming services came to 10.1%, which was a notable decline from the 21.6% posted in the previous year.
Streaming Subscribers Are Turning Towards Piracy Sites
Several industry trends have led to subscribers abandoning costly streaming subscriptions as they look towards less costly alternatives such as pirating websites.
In 2023, leading streaming sites like Disney+, Hulu, Netflix, and Spotify increased their subscription rates in an attempt to return to profitability. However, some of them offered lower-priced ad tiers targeting users who did not want to part with the high subscription costs.
In late 2022, Netflix and Disney+ secured ad options for some of their plans, which initially did not offer any ads. On the other hand, Amazon Prime came up with a new subscription plan.
However, unlike its competitors, Prime Video rolled out ads to all subscribers, requiring users to pay an extra fee if they did not want to see ads. This option has seen Prime Video face a lawsuit.
Amazon has been hit with a class action lawsuit for breach of contract for converting Prime Video to a service with ads and requiring customers to pay extra to remove ads.
The lawsuit argues those who paid for an annual subscription have been cheated and it was false advertising pic.twitter.com/0WMlPLSuYf
— Dare Obasanjo🐀 (@Carnage4Life) February 13, 2024
However, these ad tiers are doing little to maintain the subscriber numbers. The number of subscribers on Disney+ dropped by 7% to 150 million over the past three months ending December 30. On the other hand, the number of subscribers on Hulu during the same period also dropped by 3% to 48 million.
Streaming Services Change Their Strategy
Analysts are now saying that streaming service providers have to change their strategy. The goal now is not only to attract new subscribers but to also maintain their numbers. They can achieve this by offering better services and ensuring that the costs remain small. To avoid their numbers being squeezed out by cheaper alternatives like piracy websites.
One of the options currently on the table is targeting sports fans. Prime Video secured a deal to air one National Football League (NFL) playoff game during the next season.
$AMZN
❖ Amazon Paying a Record $120M To Stream an NFL Playoff Game
Prime Video is paying an estimated $120 million for exclusive rights to an NFL playoff game after the 2024 season, sources familiar with the deal tell me. https://t.co/P9t6vdXJjW
— *Walter Bloomberg (@DeItaone) February 21, 2024
The deal came on the back of a successful NFL season. Which also saw the 2024 Super Bowl game being among the most-watched Super Bowls with 123 million viewers across all platforms.
On the other hand, streaming giant Netflix is also exploring new sports content. It signed a $10 million deal with WWE Raw to start airing live wrestling matches in 2025. Next month, Netflix will also air a live tennis match.
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