Recession proofing video subscription services
By Maru Entertainment & Technology | August 18, 2022
The possibility that the U.S. will soon be in a recession keeps growing. One area of entertainment which will be particularly nervous about this possibility is subscription video. The industry is unrecognizable from the Great Recession of 2007-09. Back then the main way to subscribe to video was cable, with Hulu still a free advertising-based video on demand (AVOD) service (launching subscriptions in 2010) and only Netflix offering a subscription streaming service.
The world of 2022 is drastically different. Cable and satellite services still have many millions of subscribers but pretty much every major cable network group has also launched at least one subscription streaming service, along with tech giants Apple and Amazon.
The number of subscriptions a household carries has increased as a result, which isn’t a problem when there’s expendable income, but will be problematic in a situation of high inflation and economic uncertainty.
Who’s at risk of being cut?
To assess what may happen, Maru’s Entertainment & Technology team ran a study in July asking subscribers of each major video service the likelihood that they would cancel a subscription in the event of a recession impacting their budgets.
With cable TV, the most expensive subscription package by far, it’s not surprising to see it so far ahead of all other options as the service subscribers would most likely cut. Netflix too is on the pricier end of the spectrum, but there should be concern for cheaper services like Fox Nation and Peacock who are at the higher end of the cancellation consideration spectrum.
The good news for Fox Nation is that it falls to the least likely service to be in the top three for being cut. Cable TV is still the most likely service subscribers would consider, followed by Peacock and Netflix. Prime Video is also high, but given it is typically bundled with the wider Prime membership, this suggests that subscribers would reassess that too.
Another way to assess possible cancellation is the amount of utility a service provides subscribers. In this case, it is measured by the sense of providing value for money to customers.
Value saves the service
By that mark, cable TV still has a strong footprint, seeing the greatest proportion of subscribers rating it as providing the most value for money (these will likely form the rump of pay TV subscribers who don’t succumb to cord cutting). Netflix also has a strong value proposition among subscribers, as does Prime Video.
Widening the scope to being one of the top 3 services providing value for money sees Netflix the clear leader, but it is interesting to note that close to three-quarters of cable TV subscribers rate it as such. But caution should be noted at the services where few subscribers consider them to be good for value for money—these are potentially at risk come a recession.
Putting the two questions—most likely to cut and providing value for money—side by side can help to show which services are likely safer, at least in the initial stage of a recession.
It’s a matter of perception
Key attention should be paid to services whose value for money score is significantly lower than that of being likely to cut. For services with strong scores in both, it suggests that the initial urge to cut may be tempered by the utility the service provides. But for those with low value for money and relatively high (over half of subscribers) likelihood to cut in a recession, new strategies need to be developed quickly to strengthen service value propositions.