Parsing US Online Subscription Trends

I’ve recently done a number of surveys into online subscription trends in the US market, covering services such as Netflix, Amazon Prime, Hulu, Apple Music, and Spotify. Though the penetration and market share numbers that come out of these surveys for individual services are interesting, today I want to focus on some of the second-order trends that emerge from the numbers.

Many Still Don’t Subscribe to These Services

My questions were asked pretty broadly, so as to capture household subscriptions rather than merely individual subscriptions, since these services are often shared by families or roommates. But one of the striking things that comes out of the surveys is that those who subscribe to none of the services I listed above is still pretty high – 43% of those surveyed said no-one in the household pays for these services. That number is definitely influenced by age – respondents in the oldest age brackets were almost twice as likely to give this response as those in the youngest – but even among younger respondents, as many as a quarter replied that no-one in their household paid for these services. It’s possible that in some cases these individuals are using those services by taking advantage of an account belonging to someone outside the household, but it’s still surprising how high some of these numbers are. My previous research found that income levels also play a role when it comes to services like Amazon Prime in particular.

As broadband and smartphone penetration continue to increase, the number buying none of these services will continue to come down, but these figures certainly suggest that there is headroom for all the services to grow, by tapping into those households which have yet to see value in any of them. That may well mean offering cheaper and more flexible packages, as Amazon has done in the past couple of years by offering both a monthly option and a discounted service for low-income households.

Those Who Subscribe Often Take Several Services

On the other hand, among those who do subscribe to at least one services, many subscribe to more than one, with significant overlap between some of the major services. Among the group that took at least one service, 43% took more than one service, with 19% taking three or more. Notably, though Amazon and Netflix are often thought of as competitors given that their video services are similar in nature, it’s certainty not an either/or proposition for many households. Just over half of Netflix subscribers also subscribe to Amazon Prime, while 59% of Amazon Prime subscribers also subscribe to Netflix, so there’s significant overlap between the two bases. Given that only around a third of Prime subscribers use the video feature, that makes sense.

Strikingly, Hulu subscribers were among the least likely to take just one service – just 18% of Hulu subscribers only pay for Hulu, while 82% also pay for Amazon Prime, Netflix, or one of the music services listed. And the vast majority of those take Netflix in addition, suggesting that although these too are nominally competing services, they’re complementary for many households. However, this pattern is less true with music services, where there is far less overlap between Spotify and Apple Music subscribers. The difference in overlap is likely driven by the fact that whereas video services offer different content, the music on offer is essentially the same on all music services, with differentiation mostly at the feature level.

All of this also fits with the increasing trend towards subscription aggregation, with Apple and Amazon the leaders in the market thus far. Through the App Store, Apple offers subscriptions to a wide range of services including most of those listed, while Amazon has offered several of its own subscription services and an increasing array of third party subscriptions through its Prime channel. That’s likely to be a lucrative strategy in the years to come as the average number of subscriptions per household continues to rise.

Age and Gender Play a Role for Some Services

The age and gender of respondents also played a role in at least some of the responses. I already mentioned that older respondents were less likely to buy any of these subscriptions, and that effect was particularly marked over the age of 55. But age also played a role in the propensity to subscribe to individual services, notably the music services, where the percentage of those paying for either Apple Music or Spotify was much higher among the 18-24 and 25-34-year old respondents than among those over 35. This difference by age was far higher than for any of the other services.

Meanwhile, gender played a limited role for almost all the subscriptions, with men and women responding very similarly on all the services except one: Hulu. For Hulu, women were more than 60% more likely to subscribe than men, suggesting there’s something of a gender skew in Hulu’s subscriber base, something I haven’t seen reported previously. That also suggests there may be some upside for Hulu in making its service more appealing to male customers.

As I’ve said a number of times recently, I believe that the subscription business model is only going to grow in the coming years – it’s how many of us increasingly like to buy our content, because it offers predictability and a large amount of content for a single monthly price. Big content distributors which have yet to embrace this model will increasingly be left behind, while those that jump on board are likely to see significant growth in subscribership and revenue as a result.

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Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

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