Video streamers and legacy pay-TV companies are seeing more competition than ever, which led to a 50% churn rate in 3Q 2023, according to research from Parks Associates. Annual churn among all over-the-top (OTT) services had been 46% during Q3 2022 and 47% in Q3 2021.
According to Parks Associates, 5% of U.S. internet households have only a pay-TV service. But recent from Innovative Systems suggests that pay-TV-only households are much more common in rural areas. The Innovative Systems research, which focused on rural TV viewers, found that 27% of households had a TV service but did not have a streaming service.
In addition, Innovative Systems found that 35% of streaming households have a pay-TV service as well.
As for addressing churn, Parks Associates noted that one trend among broadband providers is to offer hyperlocal services to streaming customers. Researchers offered Cox’s Neighborhood TV as an example. The goals are to expand the provider’s influence where it is offered and to attract customers to its phone, internet and pay-TV bundles. Sinclair and Hearst are station groups that are employing this type of strategy, Parks also noted.
The hyperlocal approach is wise in the ad-supported video-on-demand (AVOD) era, in which customers prize relevance and are unlikely to be interested if a service and its messaging are repetitive and irrelevant to them, Parks said.
“Sixty-five percent of internet households have a smart TV,” noted Eric Sorenson, director of Streaming Video Tracker for Parks Associates, in a press release about the Parks video streaming research. “This platform interface serves as the entry point for many households to their content services.
“Competition for attention is extreme, while the continued rollout of the ATSC 3.0 standard gives viewers even more options, so in 2024, we will see increased consolidation, mergers, and acquisitions as all providers must find ways to innovate alongside the greater emphasis on profitability.”
Churn is not the only problem streaming companies face. Last April, Parks said that by the end of 2027, these companies would lose $113 billion to piracy and that the rate of piracy would rise from 22% in 2022 to 24.5% in 2027.