US Video Streaming Market Returned to Growth in Q4, but SVOD Contraction Continues

February 9, 2023

This article is included in these additional categories:

Customer-Centric | Digital | Spending Trends | Video

The number of households in the US with video streaming services rose by 2.5 million from September to December 2022, reaching a total of 115.6 million households, with household penetration of video streaming rising to 89%. So finds Kantar in its latest analysis of the video streaming market, also noting that “stacking” continues to climb.

The average household accessed 5.4 different streaming services during Q4 2022, up from 5.2 in Q3 and 4.7 during the year-earlier period.

However, growth wasn’t experienced across all types of streaming services. Paid services without ads (SVOD) contracted for the second consecutive quarter, while paid ad-supported services (AVOD) were the fastest-growing (+17% quarter-over-quarter and +33% year-over-year), fueled by the introduction of Netflix AVOD and Disney+ AVOD. Free, ad-supported services (FAST) also saw growth, as supported by other research indicating that these services are increasing in popularity.

It’s worth noting that inflation – which has threatened subscriptions – has had an impact. Kantar reveals that planned cancellation, steady at 5% of subscriptions, is increasingly being motivated by cost concerns. Almost one-third of planned cancellations are now a result of a desire to save money, with an additional 15% the result of price increases.

Netflix AVOD

Years ago, research suggested that some Netflix subscribers would switch to an ad-supported tier. Fast forward to the present, with Netflix’s AVOD launch in November, and that seems to be the case, perhaps to Netflix’s detriment. That’s because Kantar’s data shows that Netflix Basic with Ads now accounts for 12% of its subscriber base, but virtually all of these were existing subscribers that traded down, rather than new subscribers. Indeed, 11% of Netflix’s Q3 subscribers traded down in Q4, with this trading down behavior accounting for nearly all Netflix AVOD subscriptions during its first 2 months. Just 2% of all new AVOD subscriptions during Q4 went to Netflix.

That said, Kantar believes that with its next viral show, Netflix can probably expect more growth in its AVOD offering. Still, the firm cautions that “the industry’s focus on AVOD is a double-edged sword: it provides cost savings to streamers who may otherwise cancel a service, but it also creates a growing cohort of churners and switchers who tend to be less loyal when their repertoire becomes too big.”

For more, check out the data here.


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