Netflix Has Lowest Churn Rate Among OTT Services: Study

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When it comes to acquiring subscribers and keeping them, Netflix has found the right recipe. 

Netflix is by far the largest subscription OTT video service provider, with 52% of all U.S. broadband homes taking it by the end of last year, but it also enjoys the lowest churn rate as a percentage of its total sub base, Parks Research found in a new study focused on the over-the-top video sector.

In the past 12 months, just 5% of U.S. broadband homes cancelled their Netflix account (up from 4% in the firm’s Q2 2015 study), including those that left after the end of a trial period, Parks Research said, noting that the figure represents 9% of the provider’s current sub base.

The study also found that 5% of U.S. broadband homes also unsubscribed from Amazon Prime in 2015, representing 19% of those who claimed to have churned off the offering.

Meanwhile, 7% of those homes said they canceled a Hulu subscription in 2015, representing about half of Hulu’s current subscriber base, Parks Research said.

Among other findings, the study found that 24% of U.S. broadband homes get a subscription to  Amazon Prime for the video streaming benefits.

On a broader basis, 20% of U.S. broadband households had cancelled at least one OTT video service in the past 12 months. About 18% had done so in 2Q 2015, noted Parks

The research firm estimates that there are at least 113 OTT video services currently available in the U.S, a group that includes CBS All Access, Sling TV, HBO Now and Crunchyroll.

About 33 new OTT service entered the U.S. market in 2015, Parks said, adding that 64% of all U.S. broadband homes take an OTT video service now, up from 59% in 2015.

Notably, just 5% of U.S. broadband homes subscribe to more than one or more of those 110 options beyond the big three of Netflix, Amazon and Hulu.

Parks Associates said OTT services can be major targets for churn because they allow for experimentation and try-before-you-buy and no-contract models that don’t lock consumers into long-term commitments. And some consumers like to swoop in to watch specific content and then terminate the service when they’re done.

“Several factors contribute to OTT video service churn by consumers. In some instances, consumers are experimenting with new services, trying a service and cancelling before the trial period ends or within a few months,” Brett Sappington, director of research at Parks Associates, said in a statement. “Popular shows or events, such as HBO’s Game of Thrones or WWE Network’s Wrestlemania, can be beneficial in terms of attracting users. However, there is a risk that consumers will unsubscribe once they’ve watched these popular items.”

The churn challenge for OTT services, he said, is that they continually validate the value of what they provide because it’s easy for consumers to discontinue service.