Over a third of SVOD users to curb spending amid rising costs, survey finds

As the dust from the initial boom of the streaming industry begins to settle, a sobering reality is emerging for Subscription Video-on-Demand (SVOD) providers. According to the latest research from Aluma Connected Media Insights, 35% of SVOD customers feel they are spending too much on services like Netflix and are considering cutting back. This figure represents a 40% increase from last year and is three times the statistic from 2019.

Only one-in-twenty SVOD users are open to adding a new subscription to their viewing roster.

“US demand is all but exhausted,” said Michael Greeson, founder and principal analyst at Aluma. However, this doesn’t spell the end for established SVOD providers. Greeson clarifies, “This does not mean mature SVOD providers will not add subscribers, only that such additions will be fewer, require more aggressive promotions, and be zero-sum purchases—that is, for every new service added, another must be cancelled.”

The exhaustion of the SVOD market presents both challenges and opportunities for providers. As broadband reaches saturation with over 90% of US households connected, there are approximately 14 million households still underserved. Although federal subsidies for broadband expansion might bring more of these households online, the completion of such projects could take years.

Notably, there is no guarantee that those currently unserved by broadband will be heavy consumers of streaming services. The rise of the connected TV ecosystem might take a while to reach these yet-to-be-connected corners.

In the face of these headwinds, SVOD providers are grappling with financial concerns. Many are still operating at a loss, leading to a shift in priorities from customer acquisition to revenue optimization. This shift has taken the form of higher subscription prices, layoffs, and decreased content spending. The current strike by writers and actors only exacerbates the situation, threatening a decline in content quality even as prices continue to rise.

But amidst these challenges, an innovative solution is emerging in the form of inter-network SVOD bundles. These bundles, which combine services from competing operators at a discounted price, are gaining traction among consumers. While intra-network bundles like Disney’s package of Disney+, Hulu and ESPN+ have seen success, the future may well belong to these ‘super bundles.’

Greeson argues that strategic bundling between competitors is not just a novel idea but a survival strategy in the evolving SVOD landscape. This shift mirrors the move of over-the-air broadcasters joining cable TV in the 1970s. The goal now, as then, is survival in an increasingly competitive marketplace.

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