Subscription services braced for major exodus in H2

netflix2Subscription brands are being urged to overhaul their payment options amid claims the cancellations seen so far are merely the tip of the iceberg with a major exodus on the cards in the second half of 2022.

According to new KPMG research, almost a third (29%) of Brits have struggled to pay for their media subscription services since the start of 2022, with many needing to borrow money or use savings to pay their bills.

The survey conducted by OnePoll found that 15% have missed or defaulted on a payment for a media subscription service in the last three months.

Many companies have also been affected by rising costs, which they have had to pass on to their customers, with consumers saying they have seen their bills for all media subscription services rise this year.

The numbers are stacking up: 60% of people have seen their mobile phone bill increase; 74% have had their TV subscription bill go up; 68% now pay more for a video streaming service; and 71% have seen a rise in cost of a music streaming service.

When asked why they are cancelling media subscriptions, nearly half (48%) said it was because the company had put their prices up and it had become too expensive.

Perhaps unsurprisingly, the cost of living crisis is also having an impact: nearly two-thirds (64%) of consumers said they are decreasing the number of media subscriptions they pay for because are worried about the general increase in the cost of living and want to save money. This was the primary reason given by all age groups.

Many people have stopped subscribing to some services to pay for higher food bills this year, which are expected to rise at a rate of 15% this summer, according to the Institute of Grocery Distribution. Meanwhile, 19% have sacrificed a video streaming service; 15% have ditched a TV provider; 14% have stopped paying for a music streaming platform and 15% have terminated a mobile contract due to increasing food prices.

KPMG UK head of technology, media and telecommunications Ian West, said: “While consumers and media companies alike are feeling the pinch, organisations’ customers will value them in the long term if alternative payment options or plans can be introduced to help them continue to use their services – especially for essentials such as mobile.

“Unfortunately, the current crisis is unlikely to disappear anytime soon, and I hope that this industry adapts to support their customers in times of difficulty.”

When it comes to the generational divide, it is perhaps no great shock that younger age groups have the highest number of subscriptions and pay the most in total for their combined media subscription services.

At the beginning of the year, 18- to 24-year-olds had on average 21 different media subscriptions whereas the over 65s had just 13; meanwhile 19% of 18- to 24-year-olds are spending between £151 and £200 per month compared to just 3% of 55- to 64-year-olds and 5% of those over the age of 65.

Of course this means younger consumers are more exposed to fluctuations in prices which could explain why three quarters (74%) of 18- to 24-year-olds are planning to end at least one subscription in the next six months, while only 21% of those aged 55 to 64 and 32% of 65 and over think they will do so.

Price hikes are also hitting the youngest most: looking at mobile phone bills, 90% of those aged between 18 and 24 have seen their monthly bill go up this year, compared to just 39% of those in the 55 to 64 age bracket.

With video streaming services, 90% of the 18 to 24 age group have seen an increase in their monthly payments, compared with 41% of 55- to 64-year-olds.

The report goes on to show that video streaming companies are most vulnerable to a drop in subscriber numbers, with over a fifth (22%) of consumers saying they will reduce the number of these services they pay for in the next six months. This figure was 18% for TV providers, 16% for music streaming and 14% for mobile.

Analysing how much people are cutting back overall, 8% have reduced their monthly spend on media subscription services by £1 to £5; 18% have cut it by £6 to £10; 12% have cut back by £11 to £15 and 5% said they have reduced their bills by £16 to £20 per month.

West concluded: “The dip in subscriber numbers seen so far is merely the tip of the iceberg. The data reveals that since the start of the year consumers are paying for roughly the same number of media subscription services, with the average number declining from 14.2 to 14 overall.

“Clearly, people haven’t scrapped too many services yet, but are likely to do so in earnest in the second half of 2022.”

Netflix is already responding to falling subscriber numbers by launching lower-cost ad-funded subscription packages, for which Microsoft will be its technology and sales partner.

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