Like retailers, streamers take Black Friday as an opportunity to slash prices and get more customers in the door, so to speak.
Hulu, Peacock, Paramount+ and Max all advertised steep subscription discounts last week: Hulu with ads at 99 cents per month for a year and Peacock with ads for $1.99 per month (also for a year), to name just a few. I, for one, gave into the temptation to resubscribe to Hulu so I can watch old reality shows like “Wife Swap” and “Hoarders.”
Growth in sign-ups from discount offers is unpredictable. Some consumers, for instance, may cancel their subscriptions once their discounts expire. But based on what I’ve gathered from online forums and personal anecdotal evidence, viewers are certainly signing up. (Check out this Reddit thread in r/cordcutters for proof.)
Uncertainty aside, streamers benefit from selling super-discounted memberships because they design most of their deals specifically for their ad-supported tiers.
More AVOD subscribers translates to higher average revenue per user (ARPU) for streaming services. And, of course, platforms hope new subscribers stick around after their discounts expire and start paying full price for ad-supported memberships, which would boost ARPU even more.
Churn burns
Most streamers are in their profitability phase, so their priority is curbing subscriber churn.
Churn is the “new existential crisis in premium streaming,” said producer and business professor Evan Shapiro, speaking at Paramount Advertising’s TV Now summit in New York City earlier this week.
According to recent data from Antenna and Adobe, the rate of subscription cancellations is rising: The report classifies roughly a quarter of paid streaming subscribers as “serial churners,” or consumers who have canceled three or more paid streaming subscriptions in the last two years.
Blame price increases and more streaming competition.
Making a profit
But seasonal discounts certainly help boost user acquisition.
Even for subscribers that don’t stick around long term, a sign-up at a fraction of the price is still a bonus for a platform’s ARPU as long as that consumer is streaming with ads.
ARPU is one of the primary indicators of a streaming service’s long-term profitability, and the most straightforward way to raise it is by serving ads to more viewers to generate more revenue.
The direct link between ad revenue and ARPU is why platforms are blatantly trying to push more of their subscribers from ad-free to ad-supported accounts.
Case in point: Both Netflix and Disney+ have raised the prices of their ad-free options, and Netflix is actively enforcing against account sharing while Disney has plans to take a similar path next year. Both platforms have been vocal about prioritizing building their ad-supported subscriber bases – and both recently reported rising ARPU numbers as a result.
So, regardless of how many Black Friday-induced subscribers don’t churn, streaming services can at least expect a healthy bump in ARPU from dropping the price of ad-supported access (even if only temporarily).
In the meantime, I’m gonna go watch an episode of “Wife Swap.”
Are you enjoying this newsletter? Let me know what you think. Hit me up at alyssa@adexchanger.com.
