Streaming Services Struggle With Loyalty Amid Rising Costs and Pricing

It has been a big week for subscription services, with major players touting subscriber growth and finding new ways for consumers to engage with their content.

In audio streaming, music licensing costs are rising, but so are subscribers. On a call with analysts Thursday (Oc. 27) discussing the company’s fourth-quarter 2022 financial results, Apple CEO Tim Cook noted that the company’s recent subscription price increases come after music licensing costs rose, such that the streaming service is spending more on the content.

Additionally, he stated that, overall, the company reached 900 million paid subscriptions across its services, a year-over-year increase of 155 million, although it remains to be seen if all those subscribers will linger now that the company has significantly increased the prices of Apple Music, Apple TV+ and Apple One.

In video streaming, Amazon is seeing its strategy of investing in high-production-value content tied to tried-and-true intellectual property pay off. The company noted Thursday on a call discussing its third-quarter 2022 earnings results that the debut of “The Lord of the Rings: The Rings of Power” has boosted Prime Video’s acquisition and engagement.

“’Rings of Power’ attracted more than 25 million global viewers on its first day, and in the first two months since its launch, ‘Rings of Power’ has driven more Prime sign-ups globally than any other Amazon Original,” Chief Financial Officer Brian Olsavsky told analysts.

Yet, despite these positive reports, the number of consumers subscribed to streaming services overall is on the decline, according to data from the September report “The Subscription Commerce Conversion Index: The Challenge of Cheaters,” a PYMNTS and sticky.io collaboration. The study, which drew from a July survey of a census-balanced panel of more than 2,000 U.S. consumers found that, at the time of the survey, 63% of them were subscribed to streaming services, a significant dip from 70% in May. The report noted that streaming services lost 10% of their subscriber base on average.

Netflix, for one, is diversifying its revenue streams, expanding its merchandise presence to drive sales outside of its subscription business. Mega-retailer Walmart announced Thursday that it is taking its Netflix Hub web portal, which offers merchandise tied to the streaming giant’s shows, and giving it a physical spot at 2,400 of the retailer’s brick-and-mortar stores.

“We are so excited to continue bringing exclusive experiences and fan-favorite products to our customers where and when they are shopping,” Frank Barbieri, vice president of content and digital at Walmart U.S., said at the time.

As belt-tightening has many consumers unsubscribing, streaming services are challenged to get smarter about how they use their data, tailoring the experience to subscribers’ preferences and incentivizing ongoing engagement.

“Data is the key to fighting churn and increasing customer engagement and spending,” Vindicia Chief Strategy Officer Trace Galloway wrote in PYMNTS’ eBook, “What’s Your Plan? Payments Strategies for a Strong 2022 Finish.” “The subscription model delivers first-party data for marketers to analyze and make smarter decisions based on consumer behavior, preferences and needs. Insights derived from data can be used to recover failed payments, improve the subscriber experience, drive user engagement and optimize the subscriber journey toward growth KPIs.”