Millions of paid subscriptions to video-on-demand services (SVOD) will be cancelled in Africa and across the globe this year, with churn rates of up to 30% per market.
This is one of the key findings of the Deloitte Global Technology, Media and Telecommunications (TMT) 2022 predictions, released during a local virtual event yesterday.
The report, now in its 21st year, shows SVOD providers’ pursuit of global viewers is igniting competition and catalysing SVOD churn.
It notes companies across the globe are spinning up their own domestic streaming offerings with local content, and the amplified competition is creating abundant consumer choice − and churn is accelerating as a result.
Churn, as the term is referred to in the report, occurs whenever a subscriber cancels their subscription. This can be highly problematic for SVOD providers, which may spend up to $200 to acquire each subscriber, though acquisition costs vary by market.
As the number of SVOD services grows across the globe and the pool of untapped consumers declines, acquisition costs may rise higher still, making retention even more important, says Deloitte.
“Video streaming users will become spoilt for choice as video streaming companies expand globally and companies develop domestic streaming services. Users in South Africa already have access to the ubiquitous Netflix, as well as services such as Box Office and Showmax, offered through the MultiChoice platform, DSTV.
“While consumers have added more premium subscriptions to acquire and maintain the exact content they want, many have become overwhelmed by managing and paying for all those subscriptions, and they have become more sensitive to their cost.
“These conditions can drive customers to cancel subscriptions and/or seek less expensive ad-supported offerings, both to manage costs and as a way to pay only for the content they want by adding and cancelling services as needed,” says the report.
SA’s VOD streaming market has been a hive of activity in recent months, and is tipped for further growth as more international players make their services available locally.
British TV online subscription-VOD service BritBox officially went live in August last year, while locally eMedia Investments launched eVOD, a service offering audiences locally-produced dramas and movies on Android and Apple devices, providing a combination of free and subscription-based content.
In 2021, around 80% of households in the US had a paid SVOD. In SA, Netflix was estimated to reach some 2.6 million subscribers in Africa by the end of 2021, while MultiChoice’s Showmax had over 20 million subscribers.
While consumer churn has been most marked in the US, where SVOD has the highest adoption and the most services launched, it is expected to unfold globally.
Providers seeking to retain customers through the strength of their content are spending billions of dollars annually to develop and acquire top-tier programming, but it may not be sustainable to spend so heavily, notes the report.
“That’s the bad news. The better news is that,overall, more subscriptions will be added than cancelled, the average number of subscriptions per person will rise, and, in markets with the highest churn, many of those cancelling may re-subscribe to a service that they had previously left,” says Chris Arkenberg, research manager, centre for TMT at Deloitte US.
“These are all signs of a competitive and maturing SVOD market. As SVOD matures, growth across global regions that may have different cost sensitivities will likely require different business model innovation and pathways to profitability.”
While paid subscriptions have worked well in advanced economies, audiences in developing economies, like Africa, favour free ad-supported options, notes Deloitte.
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