Streamflation Might Be Nearing a Crisis Point
Right as the biggest players in entertainment are turning streaming into a viable business, there is growing concern that a wrench could be thrown into the entire sector: Consumers are grappling with rising prices everywhere they look, and there are signals that their willingness to keep paying more might be nearing a breaking point. Gas,…
Right as the biggest players in entertainment are turning streaming into a viable business, there is growing concern that a wrench could be thrown into the entire sector: Consumers are grappling with rising prices everywhere they look, and there are signals that their willingness to keep paying more might be nearing a breaking point.
Gas, groceries and, yes, streaming services, are rising in price at a cadence that most people would acknowledge is faster than they would prefer.
It isn’t hyperbole: U.S. government inflation data, released in January by the Bureau of Labor Statistics, said that “Subscription and rental of video and video games” saw inflation of 19.5 percent in December. That is a category that includes subscription streaming services likeNetflix,HBO Max andDisney+.
Disney+, Hulu and HBO Max all launched price increases late last year, and last month Netflix hiked prices across all of its plans. On Friday, YouTube Premium raised prices across all of its plans for the first time in three years.
Inflation isn’t new, of course (in fact, it seemed to be moderating until the Iran war), but it is perhaps most pernicious when it comes to streaming services, which provide a monthly reminder of their cost on consumer credit card bills.
New data from Deloitte in some ways underscores the conundrum: Even as the number of streaming services has grown (ESPN and Fox both launched their stand-alone services last year, and Roku launched a paid platform called Howdy, among others), the average household spends $69 on streaming services per month, essentially flat from last year. It suggests that consumers are churning more, or downgrading to ad tiers or finding other ways to keep their monthly entertainment spend stable.
Deloitte’s media trends survey also revealed that more than six in 10 respondents said they would cancel their favorite streaming service if the monthly price rose by $5, and 73 percent said they are frustrated that the prices of their entertainment subscriptions keep rising, underscoring the delicate balance at play.
Deloitte suggests that streamers should lean into fandoms, which in turn can bolster engagement and retention on their services, but as the prices keep rising, consumers will inevitably end up picking and choosing.
Of course, the ad-supported tiers could also function as a salve of sorts, giving users an off-ramp to cancellation or churn. As THR noted last month, the pricing strategies of many streamers appears designed to push consumers to the ad tiers, which sources say could deliver superior economics to their ad-free counterparts.
But as the prices of everything keep rising, streaming platforms will feel the pressure to deliver value, either in an expansion of what they offer, or in pricing, bundles and options.
