Streaming giants brace for a shakedown as life returns to normal

Companies including Netflix, Amazon and Disney need to readjust for the post pandemic world

Credit: Disney plus

In the early days of lockdown, amid the uncertainty and fear that gripped the nation, one man helped distract from the pandemic with his ludicrous antics.

Joe Exotic, the gun-toting operator of a big cat park in Oklahoma, left millions of viewers gripped by his stranger-than-fiction tale in Tiger King when it came out in March last year. The show helped Netflix reach a record 182.9m monthly subscribers for the first three months of 2020, more than twice the number it had expected to gain.

That trend continued throughout the year, with 1.3m people signing up to streaming services at the end of 2020 despite Covid restrictions forcing the amount of new shows and movies to slow to a trickle.

In that period, Amazon gained 635,000 customers for its Prime Video service, 49pc of all new subscriptions to similar services.

Netflix's Tiger King was wildly popular at the start of the Covid pandemic

Credit: Netflix US/AFP via Getty Images

Now, however, the pandemic’s biggest winners are facing the prospect of rapidly shrinking user growth as lockdowns ease, with some are warning the boom time may be over.

“The pandemic streaming party has firmly come to an end,” says Paolo Pescatore, an independent analyst. “The next few months will be challenging. As households evaluate their current telecoms and media set-up, some will consolidate and cancel services over the summer.”

Ofcom found that 12m UK adults signed up to new streaming services during lockdown, with 3m being first-time users.

However, a Deloitte study suggests cancellation rates for streaming services have nearly doubled from 20pc before the pandemic up to 37pc from October to February.

“These are the highest rates we’ve seen in the history of our survey,” says Kevin Westcott, Deloitte vice-chairman. “As fast as people are signing up to try new services, they’re deleting them once the trial period ends.”

Boom in Netflix and Disney+ subscribers has begun to tail off

Streaming giants are already warning of dwindling user numbers. Netflix is forecast to add just 1m subscribers in its upcoming earnings report.

Similarly, Disney’s share price dropped in May when it announced that Disney Plus missed an analyst expectation of 109m subscribers, instead growing to 103.6m customers.

Technology companies are also facing increased competition from deep-pocketed rivals. “The big growth in streaming entertainment has led legacy competitors like Disney, WarnerMedia and Discovery to compete with us in new ways, which we’ve been expecting for many years,” Netflix said earlier this year.

However, it will likely be smaller streaming services such as Britbox that will suffer the most from a return to normality, according to Tom Harrington at Enders Analysis.

Disney Plus has found success with series like The Mandalorian

Credit: Television Stills

“Opening back up won’t affect the big streaming services like Netflix, Amazon and Disney Plus anywhere near as much as smaller services that command lower engagement levels,” he says.

“Churn for Netflix will likely be returning to pre-Covid levels but it will still be lower than everyone else, except Amazon, which of course is pretty insulated from any of this due to free shipping.

“It will be somewhat harder for the likes of Starzplay, Britbox, Discovery+ and HayU to get new subscribers, but they are all still benefiting now from subscribers that wouldn’t have come on board in 2020 but for Covid.“

Streaming companies now need to innovate in order to convince customers not to abandon them in droves. And the focus has been placed firmly on new content.

Netflix continues to lead the pack in original content

Netflix and Amazon have already stepped up efforts to target older viewers amid disillusionment with the BBC over its push towards a younger audience.

Both services are commissioning far more shows designed to appeal to the crucial over 35 demographic, cementing their place in households and winning over the people who likely make the decision on whether services are cancelled or not.

Meanwhile, Amazon’s recent $8.45bn (£5.97bn) purchase of MGM, the Hollywood business behind the James Bond series, is designed to help it amass more content onto its Prime Video streaming service.

That deal came just two weeks after telecoms company AT&T agreed a $43bn deal to combine its WarnerMedia unit with Discovery.

The Crown has been a massive hit with older viewers

Credit: Netflix

While streaming sites may not see 2020-level sign-ups, some believe the Covid pandemic has changed habits for good. Whether we like it or not, we have become addicted to streaming subscriptions – and the easing of lockdown will only briefly reduce our appetite.

Ampere Analytics data seems to back that up. Its study shows that use of streaming services rose to 66pc of 18 to 64 year olds during the pandemic, with no sign of a dip even at the start of 2021.

“Streamers are now some of the biggest commissioners of new and original content in the world, so the easing of lockdown will represent a temporary interruption of this trend at most,” says Annabel Yeomans, a senior analyst at the company.

It may seem like the streaming party has slowed down, but it has a long way to go yet before coming to an end.

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