OTT Churn Rate at 19 Percent in the U.S.

DALLAS: The churn rate for OTT video services is 19 percent of U.S. broadband households, according to Parks Associates, meaning that roughly one in five households has canceled a streaming service in the last 12 months.

The OTT Video Market Tracker service finds the overall churn rate for OTT services has been stable for the past year. At the end of 2015, 20 percent of U.S. broadband households had canceled at least one OTT video service in the past 12 months. Churn is found to be lowest among the top three most established services: Netflix, Amazon and Hulu.

Households with OTT video subscriptions increased their spending from an average of $3.71 per month in 2012 to $7.95 in 2016. Spending on physical media purchases and rentals declined from an average of $15 per month to $8 per month, while spending on digital transactional video declined from an average of $2.42 per month to $1.42 per month.

“The churn rate has held steady, with one-in-five broadband households canceling an OTT video service in the past year,” said Brett Sappington, the senior director of research at Parks Associates. “These are not free trials but instances where consumers are spending real money to try out new OTT services. One-third of households that currently subscribe to an OTT video service have canceled one or more services in the past year, which shows that there is quite a bit of experimentation occurring right now.”

“On average, spending on subscription OTT video services now accounts for 85 percent of all household spending on internet video,” said Glenn Hower, senior analyst at Parks Associates. “The key to success in the long term will be retention. Consumers are experimenting with different OTT services, and many providers incorporate no-contract, cancel-anytime models to remove barriers to entry and to entice consumers to try new services free of obligations.”

“These services have worked to establish core customer bases, and the inertia of these core groups provides an important baseline of ongoing revenues,” Sappington added. “They continue to refine or add to their offerings so that subscribers will continue to see new value in the service, providing ongoing reasons to remain a subscriber.”