The pandemic amplified the value proposition of video streaming — giving consumers rich menu of high-quality content. Deloitte’s new research, Digital media trends, 15th Edition, finds that consumers are enjoying the diverse diet. They report an estimated 21% boost in consumer spending on subscriptions in the first half of 2021.
According to the report, almost half of all respondents (48%) spend more time on online entertainment than six months ago. While digital entertainment consumption increased during the pandemic, there are distinct differences across generations. Boomers and Gen X watch TV shows or movies at home while Gen Z plays video games and listens to music.
Eight in 10 (84%) respondents now pay for a subscription video-on-demand service (SVOD). The average household has four subscriptions, consistent with one year ago. Consumers prioritize their sign-ups by new original content, a broad content library, and a low enough cost to subscribe.
While SVOD services release quarterly growth numbers, the number of people who canceled, or both added and canceled, a paid SVOD service is flat at approximately 38%. Deloitte surmises that a few top-tier SVOD services keep subscribers while other services are added and canceled.
Subscribers report that their top reason for canceling a paid SVOD service is high costs. (Note the opportunity for ad-supported subscription tiers.) Led by Gen Z and Millennials, there’s a growing market of ad-supported video tiers. Almost two-thirds (65%) of respondents report using free ad-supported video services. In fact, according to nScreenMedia, drive ad revenue earned by virtual linear channels will double in size from $2.1 billion in 2021 to $4.1 billion in 2023.
The second most common reason people cancel a paid SVOD subscription was that they finished the show they signed up to watch. Deloitte notes that this “churn & return” behavior — canceling and resubscribing to the same service later, is most common among Millennials (47%) and Gen Z (34%). Respondents note their top reasons for resubscribing include a new release of their favorite show, managing costs, receiving a free or discounted rate, or the content they wanted to watch moved to a different service.
Gaming and social platforms also offer entertainment choices for consumers, especially for Gen Z and Millennials. While streaming video services will continue as a dominant force in the entertainment industry, SVOD players must focus on attracting, keeping, and maximizing subscribers’ lifetime value. Deloitte’s recommendations include:
- Introduce more pricing tiers while keeping premium content for full-paying subscribers. Further, consumers like the idea of loyalty programs that offer discounts on other services and products. Specifics include membership and loyalty programs that allow users to earn access to content and VIP programs that offer exclusivity to the highest-paying tier.
- Create bundling options for paid subscribers but ensure there is freedom and flexibility with each offering.
- Work with creators and influencers to create social connection points to content. Being part of social conversations offers new dimensions to the subscriber experience.
Today streaming video services offer a singular experience — lean back and view quality content. They may need to evolve their ecosystem to generate stickiness among younger cohorts. Developing and experimenting with connections to social, gaming, or music platforms is essential to growing their media and entertainment ecosystem.