The UK inflation rate is the highest it has been in the last 30 years, according to the latest reports, and it has no signs of slowing down. While the economy is headed towards a collapse, there are multiple industries that are impacted with it. The UK inflation rate was recorded at 5.5% (CNBC) in February 2022, making it the highest it has been in the last three decades.
The government’s primary goal after the pandemic restrictions started to lift was to recover all the financial losses and loss in revenue that they had suffered since 2020. This is why the UK economy in 2022 has faced rising prices in every industry. The fuel and energy costs are at an all time high, with petrol costing 167.3p per litre (Auto Express) on an average around the country, as recorded on March 22, 2022.
This only adds to the worries of inflation around the country, because fuel is the driving factor of rising costs around multiple other industries. The retail market gets affected with the rising fuel costs, the energy and electricity charges soar because of the rising costs of fuel, and the supply chain industry, which was already struggling because of the pandemic, continues to feel the impact even today.
There is another unlikely industry that is also facing the brunt of the UK inflation rate, the OTT industry. Why is this happening? What does it mean for the OTT platforms? Is it going to become a dying industry so soon after soaring?
Read more: Data Science – The Secret Sauce of Netflix
What are the OTT platforms facing in the UK?
There was a rapid surge in the subscription based OTT platforms available around the world as the lockdown hit in 2020. There were other subscription based video on demand platforms available to the market as well, more popularly known as SVODs. So the OTT platforms along with the SVODs managed to control a majority of users’ content viewing options and the traditional television and cable viewing channels slowly became obsolete.
But towards the end of 2021, the OTT platform trend seemed to have slowed down. The streaming subscription based model was available too readily, and too easily, and the number of options available in the market seemed to confuse the users. OTT platforms went from being just Netflix, Amazon Prime Video, and Disney+ or Hulu, to twenty or so more viewing options with different television shows, movies, etc. available to their viewers. The number of options created a lot of competition in the market as OTT platforms continued to struggle to stay competitive.
Netflix, one of the oldest and most popular subscription based viewing platforms went global recently and observed a huge spike in the number of subscriptions they had over the last few years. But by the end of 2021, their subscription rate also slowed down by 85% (Los Angeles Times) in the third quarter of the year as compared to the same time period in the previous year.
So what are the main reasons for the same? Is the UK inflation actually having an impact on the OTT Platforms subscription rate? What role does the UK economy of 2022 have to play on the drop in streaming subscriptions observed in the country?
Read more: Top OTT Viewing Services in the UK in 2022
The role of competitors in the OTT platforms landscape
The streaming subscriptions have been at an all time high in the last two years thanks to the pandemic. As people began to stay confined to their homes, they looked for content that was easily available online to be able to distract themselves from the global pandemic and to stay safe indoors without losing their minds.
Many entertainment platforms saw this as an opportunity to upgrade their current services and they decided to take the leap and move their viewership and services online. Most of the world has access to the internet, and most of the world has access to a smartphone. Over time, the viewing channels all moved to a streaming platform. The number of shows and movies being downloaded illegally through torrents reduced drastically as they found easier viewing channels in OTT platforms.
The sheer variety of options is what confused the audiences about choosing their streaming subscriptions. Sure, it would be viable to have them all, and have the world’s content presented to them at the mere press of a button on their remote, or a click on their mobile device, but that isn’t realistically possible, and the UK economy of 2022 has a big role to play in creating this scenario.
Read more: With Subscriber Rate Declining, What Does the Future Hold for Netflix?
How is the UK inflation impacting streaming subscriptions?
The end of 2021, as mentioned above, observed slowed growth in the streaming subscriptions arena. But, at the beginning of 2022, in the first quarter, the OTT platforms noticed that not only less people were signing up for their streaming subscriptions, but they were actually cancelling their pre-existing subscriptions in the UK.
The rising inflation rate, which crossed the expected average mark, has made the citizens of the country realise they do not have access to any disposable income that they can spend on frivolous things. Frivolous in the pre-pandemic days used to mean impromptu vacations, a splurge on your shopping spree, or even taking out a loan for a new car. It usually involved upgrading the standard of living for an unnecessary reason. But now, due to the heightened inflation rates, the definition of disposable income and what it can be spent on has changed completely.
Today, due to the UK inflation, the streaming subscriptions households have in their home or on their devices are considered to be a luxury. The more OTT platforms they subscribe to, the higher the drain is on their finances. The rising gas prices, the increase in rent, and the overall hike in the cost of living has had the average UK household scrambling to pay their bills, and many are facing debt just to meet the cost of their bare necessities. Multiple subscriptions to OTT platforms, cable TV or other streaming subscriptions seem like an added and unnecessary expense, which is why they are cancelling their subscriptions to those.
The increase in the prices for food and energy are the primary reason why people are facing this issue. The UK economy in 2022 is all set for recovering from the losses they faced in the pandemic, but it is at the cost of other industries, and the country’s citizens themselves. They cannot afford to live the same lives they lived two or three years ago, despite the increase in the number of job openings for individuals. The fact of the matter is, the lower income households simply do not make enough to have any frivolous and additional expenses.
The priority of the people of the country is to increase their savings and reduce their spendings, which is natural because they want to eliminate the debt they have amassed in the last couple of years. So it calls for reflection and introspection on how they are budgeting their money. They are seriously prioritising their expenses based on what they need and how much they can save without splurging too much of their disposable income on the things they want. Multiple streaming subscriptions to OTT platforms, sadly, does not come under a list of priorities, which is why that industry is starting to suffer.
Read also: What Does Omicron Mean for the UK in 2022?
Final Thoughts
The common man in the UK has realised that he needs to save in order to regain a sense of financial stability in times of crisis. The pandemic created a surge in demand, and with limited supply of resources, the gap has led to an increase in prices for all essentials. Food, energy, electricity, fuel to power their cars, all are impacted, and with no scope of increase in the amount each person is earning in the UK, people have realised they have to cut corners elsewhere to make do. OTT platforms are one of the segments that have been negatively impacted with this change in consumer behaviour, and until the people of the UK do not believe that they are financially secure enough to renew their screening subscriptions, it won’t be a priority for them.
