The subscription economy as a whole is booming, and there is no end in sight for this trend. A March survey revealed that the global subscription market is poised to reach $228 billion this year, a 31 percent increase from $174 billion in 2020 and a staggering $481 billion by 2025, buoyed by billions of consumers’ zeal for such services.
Given that many consumers are working remotely and that a sizable share is still wary of attending sporting events, going to concerts and visiting movie theaters, it is little wonder that many are choosing home entertainment options. Nielsen reported in April 2020 that the amount of time consumers spend streaming videos from Amazon Prime, Hulu, Netflix and YouTube had more than doubled year over year. A separate July 2020 survey reported that almost one-third of U.S. households had ditched traditional cable and satellite services, while one-quarter had trimmed such services. Value appears to be a determining factor in consumers’ decisions to abandon their cable and satellite services, with 40 percent of recent cord-cutters saying they did so to take advantage of free trials and premium subscription services.
Cost is undeniably a major factor. The largest share of U.S. cable or satellite TV users pays more than $100 per month for services. But Bloomberg found in May that the average streaming consumer was paying just $40 each month for services. Consumers’ growing appreciation for these offerings has a significant effect on revenue in the global video streaming sector, which reached nearly $52 billion in 2020and is expected to hit $86 billion by 2025.
This rapid growth in video streaming subscriptions and revenues prompts the creation of new services and increased development from existing ones. Apple TV, Disney+, HBO Max and Peacock joined the space last year, with Disney+ alone adding more than 100 million subscribers since its November debut. One survey revealed that U.S. consumers in December 2020 subscribed to an average of four streaming subscriptions, up from three in March 2020, and that they spent an average of $47 per month on video subscriptions. The survey also reported that Netflix logged nearly 204 million subscribers at the end of 2020, a 22 percent year-over-year jump, while Disney+ added nearly 87 million customers in its first year and has continued to grow. About 81 percent of respondents said they subscribe to Netflix, followed by Amazon Prime Video at 65 percent, Hulu at 56 percent and Disney+ at 47 percent.
Payment Challenges And Remedies
The video subscription industry’s explosive growth has led to numerous opportunities for new entrants in the space, creating some challenges. Providing smooth payments is a critical consideration, particularly because the nature of video subscriptions makes payments an ongoing touchpoint for customers.
Research regularly illustrates that offering payment and currency choices is one key to subscription growth. For example, subscription services that accept five or more payment methods grow 4 percent faster than those that accept three or fewer. More payment options also reduce churn, as firms that accept at least five methods experience a churn rate of 28 percent compared to those with three or fewer, which average 33 percent. Companies that accept local currencies anywhere in the world also benefit from the fact that doing so correlates strongly with revenue and subscriber growth. Companies that accept five or more currencies grow 8 percent faster than those that accept just one.
Keeping track of payments for a growing number of video subscriptions can also be arduous for subscribers. The slightest hint of friction can cause them to drop out of services, voluntarily or involuntarily. Consumers with a bevy of streaming services are fond of establishing recurring payments. But this setup means failed payments run the risk of going unnoticed by customers who would otherwise be happy to pay. There are payment solutions that can help mitigate these risks for video subscription providers. Vindicia Retain allows subscription firms to recover between 15 percent and 30 percent of terminally failed transactions. Such proactive approaches can help companies boost their revenues and improve customers’ experiences.
The video subscription space is on a remarkable upward trajectory, and all signs indicate that this will continue for the foreseeable future. Firms in the space have ample opportunities to grow their customer bases and develop new services, but they must make seamless payments a part of the equation to reduce churn and build long-term loyalty.