As the global economy struggles and household budgets are squeezed, MUSO CEO & Co-Founder Andy Chatterley reviews the impact of the current economic turbulence on TV subscriptions.
We are in the midst of a cost of living crisis worse than we’ve seen since the 1970s.
Energy, food and housing costs are rising at unprecedented levels with wages unable to keep up. The shock of the war in Ukraine and the global economy’s continued struggle to recover post-Covid have only added to this heady cocktail of uncertainty. Unless you’re a billionaire, you’re almost certainly feeling the pinch. It’s also likely that you haven’t gone a day without reading yet another article about how to slash even more off household budgets. First to go in the bonfire of the luxuries is always subscriptions.
For the first time in over a decade, streaming giant Netflix announced just under one million subscriber losses, which is the largest loss in the firm’s history. It’s safe to say that some of these losses were inevitable. At the height of the pandemic, when everyone was forced to stay home with little to distract them, millions of people turned to streaming services to stay occupied. But with the world returning to something akin to normal, there has been a natural reduction in leisure time. And buoyed by the popularity of pioneers like Netflix, other streaming platforms have moved into the market and are taking ever larger chunks of the VoD pie.
At the same time, both Netflix and Amazon Prime have raised subscription charges. Thus, faced with an increasingly fractured streaming landscape, the consumer does the math and realizes that having access to all the shows they want to watch is not a justifiable expense when their grocery bill has doubled and they’re cycling or carpooling to work to save money on fuel.
This doesn’t mean that consumers have fallen out of love with their favorite shows – far from it. They’re just falling out of love with spending the equivalent of a tank of gas on combined monthly subscriptions.
Exclusive content and a proliferation of platforms have long resulted in a customer acquisition war for providers. But this overwhelming choice – before one even gets to the myriad costs involved – can be bewildering for the consumer. And in the absence of a one-stop shop like Spotify is to music lovers, and now that piracy sites have evolved to become sophisticated, easy-to-use experiences, people who have never resorted to piracy before are finding it more appealing than ever. Everything you could ever want to watch, all in one place, only a few clicks away and all for free. What’s not to like?
Data from MUSO shows that piracy across all media sectors is up 25% in the first 6 months of 2022 compared with the same period in 2021. And as economic historians have often observed, people turn to entertainment in a recession, which ensures that piracy is only set to increase.
In the immortal words of Jon Snow, winter is coming.
Faced with this, it’s more vital than ever that platforms understand what drives piracy and use it to their advantage. First, it indicates demand and, more often than not, illegally consumed titles correlate with those enjoyed through the originating platform. For example, Stranger Things is currently a very popular title on piracy sites. People won’t lose their appetite for great TV or film just because they can’t afford to watch it conventionally – they’ll just use the back door to enjoy their favorite shows instead.
On the other hand, Spotify bucked this trend and added two million listeners in the first quarter of 2022, going some way to support the argument that by agreeing to share an ‘umbrella’ platform for TV and film, providers might stem the flow of subscription cancellation. This would mean a willingness to cooperate in a competitive market, but what is good for the consumer may very well be just as good for the entertainment companies. Moreover, Netflix may have lost subscribers, but this did not stop them from enjoying a record 7.7% TV market share in the US, according to figures from Nielsen. If you add MUSO’s piracy data from June 2022 which shows 11.4% US piracy market share and a phenomenal 16% globally, there’s no doubt that Netflix is getting an awful lot right. Now, imagine if they could convert those pirate consumers into paying customers.
By offering a service that is both comprehensive and good value for money, you render piracy a much less attractive option. But with content providers investing billions in their platforms and determined to keep their shows exclusive to them, this seems fanciful. And so the drop off in subscribers seems set to continue, with piracy sites continuing to welcome them with open arms.
Article first published on Forbes.com August 1st 2022
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