U.K. Cancelations Flash Warning for Streaming Services Ahead of Netflix Earnings

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U.K. Cancelations Flash Warning for Streaming Services Ahead of Netflix Earnings
Credit: © Reuters.

By Geoffrey Smith 

Investing.com -- Evidence of a surge in streaming subscription cancelations due to cost-of-living pressures cast a chill over the media sector Tuesday.

Market research firm Kantar said that U.K. households had canceled 1.51 million subscriptions in the three months through March, against the backdrop of surging inflation that has squeezed family budgets. That was up from 1.04 million in the previous quarter. While cancelations do typically rise after the holiday period, the rate of cancelations was still up 25% from a year earlier. 

Kantar said the services most prone to 'churn' were Disney's Disney+ (NYSE: DIS ), Apple TV+ (NASDAQ: AAPL ) and Britbox, a joint venture of ITV (LON: ITV ) and the BBC. Those least affected were Netflix (NASDAQ: NFLX ) (despite a second price hike in the space of 18 months) and Amazon Prime (NASDAQ: AMZN ).

In addition, the rate of new subscriptions across the country fell by nearly one-third from a year earlier to 1.29 million, leaving the overall number of subscriptions down in absolute terms - an unpleasant surprise for an industry that has become used to constant growth over the last decade.

“With many streaming services having witnessed significant revenue growth during the height of Covid, this moment will be sobering,” The Guardian quoted Dominic Sunnebo, global insight director at Kantar Worldpanel, as saying. “The evidence from these findings suggests that British households are now proactively looking for ways to save, and the subscription video-on-demand (SVoD) market is already seeing the effects of this.”

Respondents put financial concerns at the top of their list for canceling, with a lack of unique or compelling new programming also prominent.

The new research comes on a day when Netflix, the sector leader, is due to report its earnings for the first quarter. Its last earnings update, which warned of slower growth ahead in a more saturated, post-pandemic environment, caused Netflix stock to drop 20%, and it has fallen another 16% since then.

 

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