By Smriti Sharma, Head of Consumer Insights, Publishers Clearing House
Memberships are a powerful thing. Just ask Netflix, Spotify, Costco, and Amazon. You can build and scale incredible businesses on a subscription model with renewals.
But memberships are also tricky to manage, and consumers are fickle beasts. While Americans have prioritized their subscription services over eating out, apparel, and even groceries, consumers are also now cutting back. A perfect storm of inflation, market saturation and significant churn mean subscription models as we know them are changing.
So in this new reality, what makes subscribers stick?
From the Publishers Clearing House database of 22 million registered users, we polled 15,000 Americans about their interest in paying for content and which content they’d be willing to buy. The results offer a surprising and eye-opening window into the mind of a modern content subscriber.
Two realities underpin everything:
- Younger adults will pay for more subscription content. Consumers ages 18 to 34 are the most likely to choose to pay for content. This may feel counter-intuitive since younger people tend to have less income, but consider that Spotify, Apple Music and Amazon Music have approximately 300 million paying subscribers combined and gaming is now the largest segment of the media economy, with $200 billion in sales in 2021. Older consumers are less likely to pay for content largely because people over 55 remember when radio and TV were all free.
- Most high-income households are very willing to pay for subscriptions. America’s median household income is $79,900 and the majority of consumers who make $75,000 and up are willing to pay for subscriptions. In households that make $150,000+ that number grows even more as their income rises. And even in homes that earn less $75,000 per year, nearly half will pay for subscriptions if the offer is right.
So most consumers under 55 are willing to pay for content, especially if they are young or affluent.
But exactly what content are they willing to pay for?
It will not surprise you that movies and scripted TV series (39%) top the list of content people will happily put on their credit cards—across all ages and incomes. Documentaries (9%) are also popular, as are sports (12%) and music (11%).
Gaming is also big. Among adults 18 to 34, willingness to pay for gaming is more than twice what it is for the general population (15%); and 50% higher for audio subscriptions (16%), although their interest in paying for sports is half the norm (6%). Meanwhile, interest in audio and sports subscriptions remain high among consumers aged 45 to 54 but the desire to pay for gaming currently diminishes over 55. It will be interesting to see if this is an age or generation thing; will generations raised on gaming still want to pay to play as they get older?
As income increases, the interest in paying for sports content also increases dramatically. When you look at Apple and Amazon’s major sports moves and Disney doubling down on sports and the launch of Bally Sports+, you can see where they think the money is. Urgent programming like live sports not only enhances the subscriber experience, it heightens the value of your advertising environment as well. The NFL and baseball offer live concurrent viewing among highly engaged audiences. This makes lower-priced ad-supplemented tiers more attractive for both revenue streams: subscribers and marketers. Paramount+, Peacock, HBOMax, Amazon, Apple, Disney and many others have figured this out.
But the most interesting aspects of the modern subscriber’s mind are revealed when you zoom out even further.
Price options matter. Most people with incomes over $75,000 are ok with paying for a lot of different content. Consumers with household incomes under $75,000 are less enthusiastic. This begs for the tiering system that nearly all video-on-demand platforms have moved towards and is clearly a driving force behind Netflix’s churn. As Netflix has raised prices—especially without expanding their content offerings and without less expensive ad-supported tier (yet)—the most cost-conscious consumers have are cycling out.
Bundles matter too. Having movies and TV shows is table stakes but scripted and non-fiction TV shows are expensive and hit-driven with a relatively short shelf life. Consumers of all ages and incomes will sign up to binge them, but if that’s all your service offers, they won’t stick around. When you look at a package of films and TV, with music/audio, gaming, news, sports, or other services, staying with a paid service becomes more attractive—and more convenient.
Apple and Amazon offer films, TV, sports, music and gaming. Amazon offers free home delivery and that’s key to the lifetime value, low churn and high revenue per user from its huge Prime membership base. Disney+ only has movies and TV. But The Disney Bundle offers sports, news, and even local content, which is why Disney’s churn is now lower than Netflix’s and why they’ve eclipsed Netflix in subscribers worldwide. Paramount+ offers TV, film, sports, news and local content, and it recently created a bundle with Walmart, a significant benefit that caters to the most price-sensitive subscribers.
The more products you sell to a home, the more loyal it is and the harder it is for that home to switch—in large part out of habit and convenience. And the more products streaming platforms can offer each household they serve, with or without ads, and at multiple price points—the longer those platforms can count on keeping those subscribers and those viewers.
About the Author
Smriti Sharma is Head of Consumer Insights at Publishers Clearing House.