A new study says that American consumers are choosing to spend their money on subscription services rather than buying food and clothing.
Inflation has many people trimming the fat from their budgets, but streaming services are one thing few are willing to cut out. According to a recent CNBC article, more Americans said they would rather spend less on food and clothing before canceling their paid TV and music subscriptions. The surprising news comes from a report by the National Research Group which polled more than 2,500 adults about their spending habits last August.
Two-thirds of the poll respondents said they are decreasing their spending because of inflation. Even so, only a quarter expect to cancel their streaming services in the next six months. Most consumers said they would rather spend less on dining out, clothing, and even gasoline first.
“It’s clear that people value their streaming subscriptions more than ever,” said Kerri Norton, the National Research Group’s executive vice president of content and strategy. The report highlighted exactly how much Americans value having access to multiple streaming service entertainment options. Fifty-one percent of those polled said that subscriptions make up a “significant” portion of their monthly expenditures.
Streaming services may be making a bigger impact on the family budget than many realize. U.S. consumers estimated that they spend around 17.8% of their monthly budget, or around $135 per month, on subscriptions. Because of the way that subscriptions work, it’s easy to underestimate exactly how much these services add up each month.
It may feel somewhat sneaky, but streaming services rely on the combination of autopay and forgetful customers to make their money. By automatically charging a credit or debit card each month, the company gets paid before other bills hit the account. Because consumers aren’t consciously paying a bill each month, it’s easy for them to forget about individual transactions.
Kathryn Hauer, a certified financial planner with Wilson David Investment Advisors in Aiken, South Carolina, told CNBC that it’s a common problem. “It’s the rare person who doesn’t have at least one sneaky charge they’ve forgotten about,” she said. Another poll by C+R Research found that 42% of consumers have forgotten that they were still paying for a subscription they were no longer using, with TV/movie streaming services accounting for 22% of those.
Generation Z admitted to having the most paid-for but forgotten subscriptions (55%), followed by Millennials (48%), Generation X (43%), and Baby Boomers (24%). A 2020 Statista poll gathered data on the number of entertainment subscriptions per user in the United States. Millennials topped the chart at 17 paid streaming services and other subscriptions each, while Gen Z and Gen X also surpassed the average of 12 per consumer.
The C+R poll also revealed that more than half of consumers underestimate how much they spend on streaming services and other monthly subscriptions. Fifty-four percent of those polled said they underestimated their expenses by at least $100, while 24% said the difference was $200 or more. On average, consumers underestimate their subscription spending by $1,600 each year.
Will a 2023 recession be what finally makes Americans cut the cord with at least some of their subscription services? Only time will tell. For now, Netflix, Amazon Prime, and other streaming services can rest assured that their customers are well and truly hooked.