US streaming market faces stiff competition

FAST dominates US household viewing whilst VoD services experiment with pricing strategies and content diversification.
18 October 2023
US EoD Q3 2022 IMAGE
hannah avery

Client Manager, ComTech, Worldpanel Division

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Worldpanel’s latest Entertainment on Demand (EoD) data on the US streaming market uncovers the following behaviours and findings within the Video on Demand (VoD) market between July - September 2023:

  • Between July – September (Q3), 120M US households held at least one VoD service, representing 93% of households.
  • In Q3, Apple TV+, Disney+, and Paramount+ saw the fastest growth in subscriber share among paid VoD competitors.
  • The Lincoln Lawyer on Netflix was the most watched subscription video on demand (SVoD) title in Q3’23, followed by Prime Video’s Jack Ryan, and Yellowstone on Peacock.
  • Amid significant release delays, the average viewing time has dropped, with 11% of all VoD streaming services going unused every week in Q3, up 10% from Q2.
  • Free-ad supported streaming (FAST) is the fastest growing streaming tier in the US, with 47% of US households using a FAST service each week.
  • Netflix remains the #1 VoD destination when streamers want to find new content, but lost share to Prime Video and Hulu in Q3.

Pricing strategies impact market share in a competitive market

After a round of price increases in the last year for subscription VoD streaming (SVoD), and as the writers and actors strikes were impacting content releases, it appeared the cost of streaming would remain unchanged in Q3’23. Yet Q3 saw a price hike from Peacock in July.

In July, the monthly price of Peacock rose $1 or $2 depending on if subscribers were paying for an ad-free or ad-supported subscription. As a result, Peacock lost market share in August immediately following the price hike, with the #1 driver cited for cancelling subscriptions being to save money. The subsequent growth of Peacock from August through September was much slower than the service has historically seen. As a result of price increases, Peacock’s growth fell significantly behind that of the total paid VoD industry. In Q3, household adoption of FAST services outpaced VoD streaming, two-fold. At a time when streamers are noticing the slowdown in new content releases, price increases are more difficult to justify. With less new content, classic and hero titles account for a greater share of viewing. Streamers are turning to free, ad-supported streaming (FAST), which have a greater offering of niche genres such as classics.

With a number of price increases already confirmed or speculated in Q4, streaming services should be conscious of how subscribers’ wallets are being stretched, and the perceived value they are receiving. Value is the #1 predictor of retention, and if paid streaming services (SVoD) drop in value, we can expect even higher churn or ‘boomerang’ behaviour among VoD services, and an accelerated movement to FAST competitors.

Streaming services look beyond top titles to drive growth and retention

The US streaming market has become so established that streamers now have high expectations for each of their subscription tiers. Quality content, content variety, and an easy to-navigate interface have become hygiene factors services must maintain. For VoD services, it has become much harder to differentiate oneself on content and user experience alone.

Services are now looking beyond top titles to drive growth. Three areas have come into focus in the last year: children’s content, sports, and live streaming. Each genre accounts for less than 10% of all new streaming subscriptions and contribute even less to overall satisfaction. However, these areas remain relatively untapped and have potential to attract new audiences. As of September, only 3% of all paid VoD subscribers and 4% of free VoD users are satisfied with the variety of live streaming channels offered on their services. Yet Prime Video, Peacock, and Max are investing in live channels.

As the market becomes more competitive, investments in additional types of content help VoD services provide supplementary value and protect against churn. They also appeal to cable cutters who are used to a live feed of news, a constant rotation of content for kids, and live sports. Streaming services should prepare for an even more competitive landscape as competitors look to stand out on a wider variety of content offerings.

"In Q3'23, pricing strategies had a profound impact on subscriber retention in the US streaming market. Peacock's July price hike resulted in immediate market share loss, primarily due to subscribers looking to save money. With the growth of FAST services outpacing VoD streaming, it's clear that price increases become harder to justify in a content-scarce environment. As streaming services diversify into children's content, sports, and live streaming to differentiate themselves, the landscape is becoming even more competitive. VoD services must provide supplementary value to protect against churn and cater to the evolving expectations of subscribers,” said Hannah Avery, Consumer Insights Director at Worldpanel Division, Kantar.

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