3 Reasons Consumers Cancel Streaming Services

After a few years of competing for new subscribers, streaming services are now facing the challenge of keeping all the subscribers they managed to get. For the largest services, an increase in subscriber rates can have a significant impact on net additions from quarter to quarter.

But with so many options for streaming, consumers may find themselves moving from one service to another. SAMSUNG recently published a survey asking why people cancel their streaming service. These are the top answers.

Image source: Getty Images.

Not enough original exclusive content

Originals are a big deal in streaming. Netflix (NFLX .) -2.65% ) these days release about 10 new original titles per week, but most other streaming services probably release only a handful per month.

Of course, the original costs a lot. Netflix has burned through billions of dollars in cash over the past decade as it ramped up its original offerings to reach current levels. Walt Disney (DIS .) -1.42% ) and Discovery of Warner Bros. (WBD -4.31% ) plans for Disney+ and HBO Max, respectively, to invest billions of dollars in cash in the first few years as they work to grow their content libraries and attract subscribers.

Despite releasing dozens of new original titles every quarter, at least one analyst thinks Netflix hasn’t made enough. Indeed, consumers often watch a new series or movie, then they decide to move on to the next original, which may not be available on one of the streaming services they currently subscribe to. That said, Netflix’s offerings are far ahead of the competition’s offerings.

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Content released less often

Some consumers may be disappointed by the pace of release on some streaming services.

First, most streaming services choose to release new episodes of their originals weekly to keep subscribers from canceling. But consumers may just be waiting to sign up until they can indulge in a series.

They can also watch a series as it launches but then find out the next exciting release on a streaming service is a few months away. This is a challenge for newer streaming services, which are working to establish a library of hit series they can trust. About half a dozen popular series spread throughout the year could get many households signed up year-round.

Too expensive

Streaming services need to balance the number of subscribers they bring in with how much they charge each month, which also dictates how much they can afford to spend on content. Netflix has increased its price almost annually over the past few years with its most popular plan increasing from $7.99 per month to $15.49. The most recent price hike makes it the most expensive video-on-demand (SVOD) subscription service in the US market. HBO Max, at $15 per month, isn’t cheap either. Meanwhile, Disney has managed to keep the very competitive price tag of just $7.99 per month for Disney+.

Many streaming services have turned to ads to supplement the subscription price. HBO Max started offering ad support last year, and Disney is planning to offer a cheaper ad-supported version of Disney+ in the US later this year before expanding the offering globally.

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Some households may find it difficult to get enough value out of their monthly subscription fees. According to an analysis by MoffetNathanson, Netflix and Disney+ still offer better value than pay TV on a price-per-hour basis.

For streaming services to continue to increase in price, they will need to prove their worth. Otherwise, subscribers will run to lower-priced competitors.

What it means for investors

Investors in companies that spend big on streaming services should pay attention to how management is addressing these concerns.

Disney+ has kept its price low and has shown intent to keep it there, albeit with an ad-supported tier. Meanwhile, it continues to ramp up its content production and licensed library.

HBO Max has pulled movie releases as Warner Bros. seeks to rebuild box office revenue as the world struggles to control COVID. A service bundled with Discovery+ and CNN+ might appeal to some, or Warner Bros. Discovery may just bring more Discover content to HBO Max to bolster its library. However, its price is still high, and many consumers may not be able to justify the price tag, even with an ad-supported tier.

Netflix disappointed investors with its net subscriber additions last quarter, but it still topped and outpaced the competition with its initial release cadence. And despite the recent price hike, it still offers good value for most subscribers.

This article represents the views of the writer, who may not agree with the “official” views proposed by the Motley Fool premium consulting service. We are so cute! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that make us smarter, happier and richer.

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