Streaming subscriptions are in decline as UK households cut budgets

The UK streaming boom is officially over after the number of homes with services such as Netflix, Amazon and Disney+ fell in the first quarter, as the cost of living crisis forced hundreds of thousands of streaming fans to slim down their subscriptions to just a few favorites.

The number of UK homes that have at least one paid-for subscription streaming service fell by 215,000 in the first quarter – ending a decade of almost uninterrupted growth in the popularity of streaming services – as households cut budgets to cope as inflation runs at a three-decade high.

“With many streaming services having witnessed significant revenue growth during the height of Covid, this moment will be sobering,” said Dominic Sunnebo, the global insight director at Kantar Worldpanel, the publisher of the Entertainment on Demand report. “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.”

The unprecedented number of streaming services that are now in the market, at a time when living standards are forecast to suffer their biggest decline since the 1950s, means that ballooning home entertainment budgets that were sacrosanct during pandemic lockdown conditions are now being cut.

The Kantar Worldpanel report found that 16.9m UK households had at least one subscription service – although the average is 2.4 – at the end of the first quarter. While there were 1.29m new subscriptions to SVoD services in the UK in the first three months, this was outweighed by 1.51m cancellations, with more than half a million of those attributed to “money-saving”.

Cutting back on streaming budgets looks set to increase, with the proportion of consumers planning to cancel at least one SVoD stating the reason as “wanting to save money” hitting an all-time high of 38%.

“In times of financial uncertainty, services need to be indispensable in subscribers’ minds,” said Sunnebo. “As a result, it’s now more critical than ever that SVoD providers demonstrate to consumers how their services are indispensable in the home in what has become a heavily competitive market.”

The report found that cost-conscious streamers were identifying Netflix and Amazon’s Prime Video as the “must-have” services, with the world’s two most popular platforms proving to have the lowest rate of customers leaving in the first quarter.

Prime Video’s action series, Reacher, and Netflix dramas Ozark and Inventing Anna proved to be the most popular shows on SVoD services in the UK in the first quarter.

In contrast, Disney+, the world’s third-biggest service, saw its churn rate (the rate at which customers canceled subscriptions) triple quarter-on-quarter to 12%. Sky’s Now TV, Discovery+ and BritBox, the joint venture between ITV and the BBC, also had “significant jumps” in churn rates in the quarter.

“Netflix and Amazon can be seen to be the last to go when households are forced to prioritize spending,” said Sunnebo. “Among homes that subscribe to streaming services, Netflix is consistently ranked number one in importance regardless of what platform it is put up against. But for the likes of Disney+, the implications are significant as it must turn its attention to replacing existing services that households subscribe to now it is no longer always going to be seen as another incremental addition.”

Nevertheless, even the world’s biggest streaming service, which on Tuesday will report its first-quarter results and provide insight into the strength of the market in the coming months, is feeling the pressure of the post-pandemic slowdown.

In January, Netflix forecast that it would add just 2.5 million new subscribers globally in the first quarter, its worst start to a year in over a decade, and confirmed that in 2021, it added the fewest subscribers since 2015. Last year, Netflix attracted the lowest number of new UK subscribers since launching in 2012.