The overall churn rate for OTT video services has held steady at 19% over the past year among U.S. broadband homes, according to a new study from Parks Associates.
While about one-in-five homes cancelled an OTT service within the past 12 months, about the same rate at the end of 2015, top OTT providers such as Netflix, Amazon and Hulu have reduced their churn rates, and have been matching each other with features such as the option to download portions of their respective libraries, the firm found it its latest OTT Video Market Tracker.
Parks Associates attributes a chunk of that OTT churn to consumer experimentation.
“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 cancelled one or more services in the past year, which shows that there is quite a bit of experimentation occurring right now,” Brett Sappington, senior director of research at Parks Associates, said in a statement.
The study also found that subscribers upped their OTT video spend from an average of $3.71 per month in 2012 to $7.95 in 2016. Meanwhile, spending on physical media purchases and rentals (like DVDs and Blu-ray disks) declined from an average of $15 per month, to $8 per month. Spending on digital transactional video also dropped -- from an average of $2.42 per month to $1.42 per month.
“On average, spending on subscription OTT video services now accounts for 85% of all household spending on Internet video,” Glenn Hower, a senior analyst at Parks Associates, said. “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.”
