Streaming Wars a Potential Threat to Canadian Content
The Canadian online content market has evolved significantly since Netflix launched its subscription video-on-demand (SVOD) service in 2010. New players, new content, and, most importantly, massive increases in subscription prices are transforming the way Canadians are looking at streaming today.
SVOD platforms continue to get upward pressure on pricing from every angle, including original content strategies requiring ever greater funding, from investors demanding more profitability after years of accumulated losses, and demands, like consumption taxes, from increasingly less accommodating federal authorities.
The ongoing price hikes are having an impact on the willingness and the ability of consumers to fork over more and more of their hard-earned cash to get their streaming fix. Even though the initial Netflix monthly subscription of $7.99 in 2010 more than doubled to $16.49 in 2020, its subscriber base grew from one million to seven million during that time.
The streaming market’s tandem growth in pricing and subscribers, driven by new content consumption patterns and preferences, is now entering a mature phase. The softening of consumer demand is a function of price elasticity reaching its breaking point.
An early Morning Consult survey of US viewers found that 17% would not pay more than $15 (CAD19) a month for SVOD services and 63% saying they wouldn’t pay more than $50 (CAD61). According to the latest CMF Trends Report, 60% of Canadians (22.5 million) subscribe to at least one SVOD service at a total cost of $1.4 billion per year...or $53 per month each. If estimates are accurate, the cost for multiple-subscription households would be much higher.
With the cost of SVOD services reaching or exceeding the upper price limit for most consumers, it’s time to start asking what strategies platforms will be adopting to address the problem, and what strategies consumers will be adopting in response.
Apple TV+ and Disney+ moved in on a crowded Canadian streaming market in 2019, one where the likes of Netflix, Amazon Prime, and HBO were already taking the lion’s share. Canada is unique in that many small players also enjoy sizable market share, with 10% of Canadian households subscribing to Crave, GEM, Tou.tv, or Illico.
Since household streaming budgets can no longer keep pace with SVOD subscription price increases, there’s a risk of generating higher rates of churn, cancelling one subscription and replacing it with another depending on platform promotions, content offerings, and evolving consumer preferences.
According to a recent Antenna report, the churn rate for US platforms, with Netflix at the top, is often two to three times lower than the rate for other SVOD platforms. From 2019 to 2021, for example, the average annual churn rate for Netflix was roughly 2.4% compared to 4% for Hulu and 7% for other platforms. This does not bode well for Canadian platforms with smaller market shares, likely as they are to be more negatively impacted by inflated subscription prices.
Any threat to smaller platforms could also pose a threat to original Canadian content that might be rendered inaccessible in the process. In a scenario similar to what happened when basic services were regulated by the CRTC in 2016, it will be interesting to see what strategies SVOD providers come up with for capturing more market share or even holding on to enough share to keep their hungry investors satisfied.
As the SVOD market continues to mature, it would not be surprising for some consolidation to occur. Even a meta streaming bundle grouping all content under one universal interface is not beyond the realm of possibility. In fact, that might be the only way for people to have access to most of the content…at a price that they can afford.