SAM NURSALL
21/10/2024 - SAM NURSALL
How might the FTC’s “one-click-cancel” rule affect TV and video providers?

Q. What is the new FTC ruling?

Last week, the US Federal Trade Commission (FTC) announced a new ruling which will require subscription-based products, such as video streaming services, to “make canceling a subscription as easy as signing up”. This policy decision, deemed the “one-click-cancel” rule, has been made after the FTC has claimed to have received about 70 complaints per day about subscription cancelling in 2024. 

Q. Why is it being brought in? 

The decision appears to be a response in part to a widespread consumer sentiment that managing too many subscriptions can be a cumbersome balancing act. The proliferation of SVoD (subscription video-on-demand) services in the last five years, for example, has notably altered the “consumer basket” of entertainment. Ampere’s data shows that 30% of households in the US have access to 5+ streaming services. Such streaming households can face monthly bills of up to $70 for ad-free tiers of SVoD services alone, on top of the cost of a complementary pay TV or broadband service, let alone other popular subscriptions (including cellphones, gym memberships and music streaming). 

The cost and complexity of managing multiple household subscriptions is compounded by macroeconomic factors -  including high inflation and rising food and fuel costs - which are putting pressure on consumers, many of whom are trying to cut back where possible. But by at least addressing issues around another compounding factor – a perceived lack of transparency from certain service providers around the process of cancelling a subscription - the FTC is seeking to mitigate the challenges for consumers looking to manage those subscriptions more easily.

Q. What are the implications of the ruling?

For streaming platforms in particular, churn mitigation has become a high priority, with many services now focusing on profitability in a mature market where subscriber growth opportunities are limited, and where consumers face cost pressures. Ampere’s consumer research  reinforces this sentiment: 42% of Americans admit they “often subscribe, cancel, and resubscribe to video on-demand services so that I only pay when there is something to watch”. In fact, just under half (47%) of total US sign-ups for SVoD services in Q1 2024 were from resubscriptions. 

The decision by FTC has not been framed exclusively around streaming services, though; indeed, given the problem with churn it would appear that many consumers feel well able to manage those subscriptions. In actuality, pay TV may be more at risk for churn under the new rule than SVoD services. Pay TV subscriptions are typically more difficult to cancel than SVoD services. Accounts are often linked with phone or Internet plans and contracts can include vested price hikes or penalty fees for opt-outs. In contrast, SVoD services typically require around five clicks to cancel, and speaking to a live customer service representative is rarely required. 

Ultimately, the FTC rule could have a larger effect on pay TV accounts than SVoD, accelerating the historic trend of cord-cutting. Notably, in this context, over half (54%) of US pay TV customers surveyed by Ampere claim they “could see my household no longer watching broadcast TV within the next 5 years.”  

Q. How might these services react?

Assuming the “click-to-cancel” rule does somewhat increase the risk of churn for pay TV or SVoD platforms, we may see these services intensify their retention efforts. While bundles between pay TV and SVoD services have become increasingly popular in the US, the “click-to-cancel” rule may prompt a further array of “sticky” bundle offerings between telecoms and streamers. Intriguingly, such bundles may even see SVoD services – which more readily allow subscribers to churn – move more towards the telco/pay TV model of longer-term contracts in return for a discounted price.

In other scenarios, streamers may also adjust their content strategy to placate a potential future “churn-happy” audience. While platforms have largely moved away from the “batch release” common in the early days of streaming, for example, this new rule could mark the end of this release format. Week-to-week releases require customers to maintain a subscription over the span of multiple months, even if they’re solely interested in the one show. Licensing, a streaming industry hot topic of late, could even see a pullback as platforms attempt to draw users in via their exclusive and original offerings, reversing the recent decline in commissioning of originals.

The new ruling, which is set to take effect in early 2025, is not intended solely to target streaming services or pay TV providers. But in a proliferating market for consumer subscriptions, and where households are feeling the pinch, it certainly has the potential to impact their business.


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