• by Karlene Lukovitz  @KLmarketdaily, July 12, 2022

As streaming’s explosive pandemic-driven growth has slowed and inflation has set in, pricing has become an increasingly important driver of subscription video-on-demand service (SVOD) subscription adds and cancels, according to research from NPD Group.

Between October 2021 and April 2022, NPD’s surveys show cost having risen from being the No. 4 reason for cancelling an SVOD service to being No. 2, below content.

Further, as of April 2022, free-trial offers were the No. 1 reason cited by SVOD users signing up for a service.

In addition, promotion/discount offers became the top reason driving preferred sign-up method, moving up four spots from October 2021 (among viewers extremely or very likely to subscribe to a SVOD service in the next six months). 

In its most recent survey for its TV Switching Study, NPD surveyed more than 5,000 U.S. consumers 18 and older, from “diverse regions and demographic backgrounds,” between April 5 and 21.

“In the last several months, consumers have had to navigate rising prices in many facets of their lives, and SVOD services are part of that mix, with companies like Netflix and Amazon raising their subscription rates,” observed John Buffone, NPD executive director and industry analyst. “While cost considerations in SVOD services are still dramatically lower than in cable and satellite TV, it is important for providers to recognize that price sensitivity is growing, so they can adjust their offerings to retain their subscriber base.” 

Still, content remains a critical factor.

In fact, knowing that a specific TV show or movie was on a service drove one-third of SVOD users to sign up — an increase, up six percentage points, versus six months ago that was driven by younger viewers.

“Consumers are creating a value equation to determine what services they ‘need’ versus those they cancel, especially as they return to experiential activities,” Buffone noted. “For some consumers, ad-supported tiers can be a way to cut costs without losing access to content.”

In the months ahead, particularly with both Netflix and Disney poised to add ad-supported video-on-demand tiers, “understanding the differing consumer value propositions will be key in determining tier structure and pricing strategies,” he adds.

When pricing tiers are available, NPDs surveys indicate that a customer who pays a premium for an ad-free experience is engaging with the service more frequently, with 28% reporting using the service every day or most days, versus 20% of the ad-supported subscribers reporting the same.

Consumers who pay a premium for ad-free viewing also place significantly more value on content availability, exclusivity, search, discovery and user interface, indicating that they are more engaged consumers.