I’ll admit, I was bummed when certain major streamers this year said they’ll stop disclosing quarterly subscriber and account metrics in 2025. But a strengthened focus on engagement could be useful and an important indicator for the user health and sustainability of streaming services and platforms.
Specifically, at the start of Q1 we’ll no longer get quarterly updates on subscriber figures or average revenue per user from Netflix, nor will we get disclosures from Roku about streaming households and ARPU data.
In an industry that was obsessed with subscriber growth at the onset, Netflix plans to focus on user engagement as its primary subscriber metric going forward (but will disclose key subscriber milestones).
It’s a move not everyone is happy about, myself included, given that as a reporter aiming to have a grasp on the industry, additional data points are typically more welcome than fewer. And suffice it to say, I (like most others I’d guess) like data, and as I write this, it doesn’t escape me that the case could also be made that the industry needs more metrics instead of less.
That was the sentiment of Michael Nathanson of MoffettNathanson, who, when Roku said it would stop reporting key performance metrics, told StreamTV Insider that “the solution should have been adding more disclosure not less" about U.S. key performance metrics vs international KPMs.
He also pointed to the performance metric disclosure changes, as well as revenue guidance, as contributing to Roku’s stock decline fowling its Q3 earnings release.
"The market is telling [Roku] what they think about that new revenue guidance and the change in KPMs,” Nathanson commented. “They have terrible disclosure [a]nd this actually makes it worse.”
But given the maturing status of large US streamers in their domestic market, it makes sense that subscriber additions (or worse, losses) are no longer the highlight metric.
Netflix in its reasoning for shifting its narrative to Wall Street, noted the introduction of paid sharing and advertising revenue streams aren’t directly tied to subscriber numbers, as well as multiple price points for different tiers that vary by markets, means it no longer feels those long-reported metrics are the best indicators of the company’s business and instead will highlight financial metrics like revenue, margins, EPS, net income and free cash flow, among others.
To the idea of subscribers no longer being the star of the show as streamers instead seek profitability, Ampere Analysis this week predicted global paid subscriptions to online streaming services will surpass 2 billion by 2029, up from the 1.8 billion there are today. While poised to expand, Ampere noted APAC is going to be a significant region driving subscription growth over the next five years, as major US services expand internationally, and the US market becomes increasingly saturated. Overall, the projected sub increase still represents a marked slowdown from the previous five years amid the COVID pandemic, when global streaming subscriptions more than doubled between 2019-2024. And the firm expects subscription streaming revenues will grow almost three times faster than subscribers in the forecast period.
While Netflix continued to add subscribers in Q3, with the possibility for domestic subscriber numbers to plateau, decelerate, or even decline down the line (as they did in Q1 and Q2 of 2022 - a year that saw the SVOD lose over 900,000 net US/CAN subscribers overall before returning to gains on the back of paid sharing efforts and the introduction of an ads plan), there’s obviously some self-serving purposes for streamers to obscure potentially less flattering metrics and instead focus on strengths.
Whether that actually gives a clearer picture into the health of the company, I’ll leave it to folks with finance chops.
But my point isn’t that subscriber and account metrics aren’t useful nor that companies should stop disclosing them. It’s that while fewer data points may not be helpful, a strengthened focus on engagement metrics is. Particularly when it comes to streaming businesses that increasingly aim to generate advertising revenue and face competition from and for attention and time spent against social video giants like TikTok and YouTube (the latter which continues grabs the leading share of streaming TV time in the U.S. each month, followed by Netflix, per Nielsen).
How many services (streaming or otherwise) do you subscribe to but barely open up, or forget you have altogether? I’ve probably got at least a couple.
I’m sure companies are happy to take my monthly payment whether I use the service or not. But while it might not be right away, if I haven’t touched an app in months, odds are I’m certainly not talking about the programming with others, and eventually I’m going to look to take it off my bill.
And touting subscriber figures to advertisers – while important to show scale for reach purposes – might get investment in the door, but if engagement isn’t there, then what’s the point? (Makes me think of the debacle of ads being counted as served to older CTVs that had the screen turned off).
Becoming part of the routine
Then there are others – one SVOD in particular – that has become part of my daily routine.
In the morning, I watch local news (or sometimes afternoon, depending on the schedule), catch up on weekly shows in the evenings and often turn to it on the weekends for certain live sports and movies.
Engagement metrics can also shed light on propensity for the industry-wide issue of churn. Since I use the aforementioned SVOD so often, it’s on my ‘must-have’ list and not one I’d easily cull even if I’d finished a current series.
Although my focus group of one is rarely the best indicator, I find it hard to believe I’m alone in this sentiment.
Once something’s incorporated into my weekly, or better yet daily or multi-daily, habit, the related engagement metric, to me, signals sustainability (at least more so than the SVOD app I shell out for monthly but is collecting proverbial dust…writing this reminds me that I really should cancel that). And if an advertiser wanted to reach me on the platform, they’d have multiple opportunities in a day and across different forms of content to do so.
This notion isn’t new.
AMG’s President of Digital Michael Senzon at an industry conference earlier this year emphasized the importance of making streaming a daily habit. Disney, meanwhile, has made moves like adding Hulu content and more recently an ESPN+ tile to Disney+ - in part as a way to boost engagement by offering more volume and types of programming for viewers, without the need for them to leave or switch apps.
And as Netflix itself said in a Q3 letter to shareholders, engagement – which it defines by the amount of time users spend on the platform - is the “best proxy for member happiness.” Netflix co-CEO Ted Sarandos noted that higher engagement means members are less likely to cancel and more likely to talk about to Netflix to other potential subscribers, helping both retention and acquisition. As its home streaming market matures, retention and related engagement metrics become all the more important.
Plus, a streaming service could have millions of users, and while advertisers certainly require scale for reach purposes, if they’re only tuning in for brief or sporadic stints, it’s not likely to deliver on intended goals (caveat for tentpole and other one-off events – plenty probably got their money’s worth with record viewership on live linear events including NFL on streaming over the Thanksgiving Day holiday).
For platform players like Roku, elevating engagement metrics might make even more sense, as my TV OS platform of choice is even more so ingrained in the daily habit, in that I’m utilizing the home screen and interface no matter which app I might finally land on. And unlike a subscription service, as the device platform it’s likely going to be at least a few years before I make a change - albeit easier to swap out for those using external dongles and devices.
It’s also no secret that engagement also drives the data engine - where the more viewers watch and use the more insights streamers and platforms have to lean on to inform programming, windowing, tune-in and marketing strategies, alongside other decisions, that are key to keeping and attracting users to the service.
And while they might also want subscriber metrics, Wall Street and investors also appear, in general, to like engagement.
As Needham analyst Laura Martin said earlier this year at The StreamTV Show, “Wall Street believes at the bottom of their hearts that money follows consumer time spent, over time.”
So advertisers and investors like to see that people are not only signed up for or subscribed to platforms and services, but actually actively using and engaging with them regularly. As leading streamers face competition from TikTok and YouTube, more transparency from streamers around usage and audience analytics and the ability to prove that viewers are engaged with (and hopefully increasing) time spent on their service is all the better.
Opportunity for niche streamers
A focus on engagement as the user health metric of a service versus subscriber additions could also bode well for niche or specialty streamers, which often tout engaged and loyal followings, but typically smaller subscriber or user bases.
Here I use niche meaning those that offer a specific type or category of content – because while they tend to be smaller in size, niche doesn’t always mean a tiny base. Crunchyroll is probably the best example of that, where as a streamer dedicated to anime, it’s very category-specific – but with anime’s already large and growing fandom, counts a significant subscriber base of 15 million (perhaps using this metric is counter to my own point – but again, ideally all the data points, but engagement ain’t a bad one). Recent Antenna data showed growth in specialty SVOD subscriptions (nearly 20% yoy as of June 2024) far outpaced that of premium SVODs. And if engagement is prioritized over straight subscriber counts, leading ad-supported indie and/or smaller and specialty streamers with fandom followings could stand to see more investment flow their way.
Questions as engagement metrics are elevated
As streamers prioritize engagement as barometer, a question will be just how the metric is measured or defined across different platforms and services and how granular and specific streamers will be willing to get in terms of what engagement metrics they disclose (any uniformity?), and the meaningful takeaways observers can glean.
Another question is whether all engagement is equal. Time spent, account views and hours streamed are clearly metrics, but does the viewing behavior attached to those matter or make a difference - and if so, how much and by what measure? Is a user who binge watches multiple hours of a series over the weekend but only uses a service a few times a month equally as valuable or as engaged as someone who only uses a service for an hour but does so every day?
Adding a layer of complexity to streaming engagement metrics is that TV entertainment often involves co-viewing where household members watch together at the same time, as well as the potential for multiple people in a household to use the same subscription or device to watch separately. Dedicated user profiles for each person in same household is clearly one way streamers aim to get more granular data on engagement, but is it important or even possible to accurately measure individual versus household engagement with a service or platform and its content?
And an increased focus on engagement metrics means platforms and services will all the more need to serve up not only strong programming but user experience, personalization, content discovery, recommendations and other features that help to keep viewers coming back often and staying longer.
So, ideally, would I like to get regular and granular metrics on subscribers, accounts and engagement? Of course. But while questions remain, in a space where everyone’s vying for consumer time and attention, engagement is a key and worthwhile user metric to prioritize and get regular updates on.
And with domestic subscriber growth somewhat stagnating for others (WBD, for example, added 7.2 million globally in Q3 but its US/CAN base has hovered at roughly 52 million for the past five consecutive quarters, a decline from the 55 million it had in the Q1 2023 quarter ahead of Max’s US launch) I doubt Netflix and Roku will be the only ones to pull back on sharing regular subscriber and account metrics as home markets get more saturated.
It may only be a matter of time before others follow suit and change the narrative to engagement – assuming they’ve got it.
Bevin Fletcher is senior editor of StreamTV Insider, covering the CTV industry across business topics such as distribution, monetization, and product and technology. Op-eds are opinion columns and don’t necessarily represent the views of StreamTV Insider.