The streaming revolution is reshaping content consumption at a rapid speed. comScore’s State of Streaming 2023 reveals a 21% surge in the number of hours households watch connected TV (CTV). This increase translates to an additional 2 billion hours in 2023 compared to the previous year. Total hours viewed grew from 9.6 billion to 11.5 billion from May 2022 to May 2023.
Ad-supported services, which claim the largest part of the newfound viewing audience, are driving this growth. The data underscores the shift towards digital streaming as millions of households’ primary content consumption mode.
The overall growth in streaming consumption is quite impressive. However, the most game-changing statistic highlighted in the report is that 75% of the newly acquired streaming hours are from providers beyond the top six streaming apps. This elite group includes Netflix, YouTube, Prime Video, Hulu, HBO Max (now Max), and Disney+ is witnessing an interesting transformation. As the consumption of FAST (Free Ad-Supported Television) and targeted programming intensifies, these traditional giants face competition from rising stars in the streaming realm. FAST’s expanding influence is reshaping the streaming landscape.
Key trends in the streaming market
comScore’s report explores and confirms trends in the streaming landscape, adoption, growth trajectories, and the ever-evolving range of services.
Digital video acceleration: Digital video consumption is accelerating, with 81% of households with WiFi engaging in streaming content.
Ad-supported streaming growth: CTV households streaming ad-supported content now reach an impressive 83.7 million, a 17% increase from 2021 to 2023. Non-ad-supported services also showcase growth, reaching 81.1 million, reflecting a 9% increase.
Targeted programming triumph: Targeted programming on FAST platforms is surging. Hispanic households lead the charge by consuming nearly twice as many hours of FAST content, showcasing an impressive 81% YoY increase. Linear streaming providers also found their place in the digital realm, securing three top spots in the Top 10 video services based on hours viewed per household.
Cord-cutting dominance: The cord-cutting trend is reaching a new milestone, with 60% of CTV households now being cordless. This substantial leap from the 37% recorded in May 2019 underlines the growing shift away from traditional TV subscriptions.
Smart TVs reign: Smart TVs are firmly establishing themselves as the preferred device for CTV streaming, with a robust 23% increase in total households streaming content via these devices since May 2021. Gaming consoles are also seeing a notable 18% increase in usage for streaming purposes.
Real-time market impact at play
Further, comScore’s report provides context in understanding how the evolving TV streaming marketplace impacts the current television revenue model. The current Charter-Disney dispute centers on pressure to change the existing television distribution paradigm. Charter is declining to accept Disney’s requested fees for its channels, citing the fact that Disney primarily reserves its premium content for its streaming platforms. Charter wants complimentary access and distribution flexibility, which directly impacts Disney’s direct-to-consumer revenue strategy. This dispute underscores the rapidly shifting dynamics of the entertainment industry.
The State of Streaming showcases the ongoing revolution of streaming in the entertainment landscape. With consumption growth, the ascent of ad-supported services, and the proliferation of emerging players, the report provides valuable insights to help reshape content monetization strategies.
On May 2nd, the Writers Guild of America (WGA), an alliance of over 11k film, TV, news, radio, and online writers went on strike demanding fair contracts and pay stability. They also stated numerous concerns surrounding artificial intelligence. In June 2023, 65k actors from the Screen Actors Guild (SAG) cast their votes to join the strike in support of their colleagues and to protest how technology has affected their wages as well.
There is much talk about the impact the current entertainment industry strike will affect advertising. The truth is, we are just starting to see its influence. This is mostly due to the timing of the strike. Many scripted shows are on hiatus during the summer and typically advertising is purchased well in advance of their run dates. As the strike drags on, the impact will be keenly felt across much of the media industry.
Here are five ways we will likely see the strike impact advertising’s bottom line.
A short strike may be a win for broadcasters and streamers
In the short term, broadcasters and streamers are likely to see a boost in their profits. While that may seem surprising on the surface, if the strike lasts under four months it’s a real possibility.
Broadcasters and streaming companies have already sold the advertising that will air during these months. Additionally, contractor and personnel costs declined sharply during the early months of the strike. Hopefully, these early profits are reinvested to buy up the rights to movies and content available for sale – as a way to shore up their audiences regardless of the strikes’ duration.
However, broadcasters and streamers should be prepared with new inventory, so they don’t lose out to social media if the strike continues until early 2024, as many predict it will. They will want to avoid airing reruns instead of new content, since that will affect viewership and in turn advertising revenue will be lower.
Broadcasters will be hit hardest if the strike goes beyond six months
If the strike lasts only a few months, changes in ad spend may be limited. In the short term, we haven’t seen much of an impact on ad sales. However, if the strike goes beyond a few months, the largest TV broadcasters could be hit hardest. Relative to streaming channels, TV broadcasters have more content that’s prepared “just in time.”
Unscripted television, like variety shows, reality shows, and game shows have not been impacted by the strike too much. However, we do see a hit to lucrative late-night talk shows, which have already been off the air for a couple of months. This programming relies on writers who have been on strike since early May.
Prime time advertising is estimated at $13.1 billion during the first half of 2023, which makes up 50% of all national TV ad spend. If the strike is prolonged, we could easily see some weekly prime-time TV shows off the air after a few months of their Fall debuts, as a result of new episodes not being completed.
Media & entertainment advertising will suffer across media
Movies, streaming services, and TV shows (along with others that support the industry) invested over $3.9 billion from January through June 2023. This represents 39% of the total ad spend from media and entertainment advertisers ($10 billion). This estimated advertising investment reaches beyond just TV, to over a dozen media formats. Since the start of the strike, we saw a dip in May YoY (4%). However, in June this segment was already down 26% YoY. As the strike continues, advertising to promote movies, shows, and streaming services will likely continue to decrease and shift in investment.
A prolonged strike may even prompt the largest U.S. firms to move more English-language production outside the U.S., to work around the problem entirely. Many countries have none of the protections offered to SAG members in the U.S., offering a viable alternative to production companies.
Streaming and social platforms may experience a resurgence due to the strike
Streaming channels have significant material pre-recorded, “in the can.” This gives them the ability to release movies, mini-series, and documentaries. If they have new content while broadcasters are struggling to recreate fall lineups, streamers will benefit. Netflix’s CEO has already said they’ve been preparing for the strike for some time and will stretch out their new releases.
In the event of a longer strike, streaming channels can easily dub content from outside the U.S. and show it here. We saw this during the pandemic. For example, Netflix saw great success airing the South Korean survival drama, Squid Game in the US. Another example, and a personal favorite of mine, was the HBO produced sci-fi flick, Beforeigners. This show was originally produced in Norway and was dubbed and placed in their U.S. lineup.
We are also likely to see social video platforms like YouTube, TikTok, and Instagram benefit from a prolonged strike. Their content producers are independent and non-unionized so these platforms will not see a pause in content creation. Viewing hours could easily surge as they did during the pandemic, which will drive more advertising dollars away from traditional broadcasters and toward streaming and social platforms.
Sports and news content will be sold at even more of a premium
Broadcasters with sports rights could do well in this environment because sports content is likely to be one area that isn’t negatively affected by the strike. Broadcasters will likely lean into more active coverage of sports. And they can use the strike as ammunition to defend the high price of sports licensing fees.
We also predict that news broadcasters will sell advertising at a premium as well. News broadcasters are covered by SAG, but they have their own separate contract. As a result, news programming and advertising supporting it will continue and may even expand. Media like CNBC, NPR, Bloomberg, etc. will be mostly unaffected.
While the full impact of the writers’ and actors’ strike is still very much uncertain, it is expected to result in notable alterations and realignments of advertising investment in the upcoming months. While some may experience short-term advantages due to reduced costs and pre-sold advertising, the long-term impact could profoundly impact advertising investment across media.
Digital media has experienced a near-constant evolution in consumer behavior, preferences, and expectations over the past couple of decades. And things show no sign of slowing down. Many media companies are not just at a crossroads, they are at a point of no return. How they respond now will likely shape whether they survive or not.
Of course, some media companies have adapted skillfully to these changes. It’s now possible for consumers to watch TV on half a dozen devices whenever and wherever they want (possibly all at the same time if you’re my kid). We can read the news from anywhere, and the news now often comes packaged with games, recipes, communities, podcasts, and even in-person events.
Meanwhile, advertisers can track viewers across platforms, and measure engagement on a deeper level, with more robust data than anything offered in the Nielsen era. Even the programming has changed, as media companies adapt to changing audience preferences.
As media companies continue to evolve and experiment, the challenge is to do this without potentially alienating their customer base. It requires the right mix of innovating with a product mindset to create something new: viewer experience, insights into customer wants and needs, and consumer engagement.
It all starts with product
What do companies need to consider to move the needle? They need to constantly shift with – and shift – consumer expectations. There is a cost in every decision that media companies make, and every action or inaction has consequences.
All of these decisions ladder up to the product itself. Product development never, ever stops, because if it does, it leads to stagnation (and even irrelevance). For example, media companies like National Journal have made their investments to differentiate, not just improve. Category leaders like Netflix, Instagram, and TikTok offer products that look very different today than they did a few years ago because they continued to evolve. They updated to both shift and meet consumer expectations and as a result, have remained the best at what they do.
For media companies looking to follow a similar pattern, there are three key considerations:
Insights into customer wants and needs
Developing cutting edge products requires alignment with users, because every innovation has to improve the experience. Every product must be highly-intuitive and easy to interact with. As companies push the boundaries on what’s possible, they also need to ensure that new functions work seamlessly.
If you are a consumer, there’s nothing worse than loading a new application or website area only for it to raise questions in your mind. This extends beyond the technical components to other consumer touchpoints, including user support and billing.
At the core, media companies need to design products that their customers love, and not just simply use.
Insights into customer wants and needs
The goal of every media company is to build an experience that consumers love. To do that, companies need to constantly research and design for needs. The biggest insights in media consumption habits are the rise of free ad-supported TV (FAST) channels on streaming platforms and the dominance of short-form content.
Consumers accept advertising because they know that it funds the media they are viewing, reading, or hearing.
Media companies have looked for a way to layer advertising on top of their offerings in a way where advertisers see value, and consumers understand that the ads they see are funding the media they digest. FAST channels seem to strike this balance perfectly, much to the surprise of the ad industry.
Short-form content offers another, similar opportunity. TikTok’s massive adoption shows that consumers are ingesting information at a dizzying pace. Media companies should be seeking out ways to create and capitalize on this new form of content.
The natural benefit of designing for needs is that it improves user engagement. One of the biggest learnings about the FAST adoption described above is that consumers actually use ads as a way of engagement. This creates opportunities for media companies to use these ad slots to get consumers to engage with new forms of content.
Ads are now interactive, with surveys or the ability to click to watch something new. By using data signals and programmatically serving tailored ads to customers, media companies can help drive consumers to other products and content offerings, building greater engagement.
Engagement goes much deeper than watching ads, of course. Media companies want consumers to spend time with their content, whether that’s as simple as watching a video or reading another article, or as deep as attending an event or paying for a subscription with unique benefits.
Streaming TV is largely viewed as TV in the traditional sense, but consumers don’t always engage with it on their couch in the living room. Some watch on the subway, some just run a TV show in the background and listen to it like a podcast. Media companies need to adjust their user experiences to better meet the evolving needs of these different audiences.
Learn without asking
As media companies work through the three considerations above, they need to keep one thing in mind: consumers aren’t necessarily going to tell you what they want. In fact, they may not know what they want. So if you adopt a product mindset and continue to evolve and push forward, it’s critical to analyze all of the data signals you have on consumer behavior and build something that meets the trends.
Product development never ends, and that’s especially true in the media space. A decade ago, no company would have been able to predict our current situation. It’s unlikely that any single enterprise can accurately predict the next 10 years of change, either. Regardless, evolution is key, so that media brands can remain in business and help define the next iteration of the industry.
The streaming television landscape is increasingly competitive. Experimenting with the formula for success, many streaming services are introducing ad-supported tiers, while others are raising subscription fees and consolidating corporate offerings. Therefore, understanding consumer preferences regarding payment methods, perceived value, and preferred providers is crucial to meet audiences’ changing needs in an evolving environment.
Hub Research’s new report, Monetization of Video, delves into the evolving dynamics of the TV business from a consumer perspective. The study shows that nearly half (43%) of respondents reached their set limit of seven different TV services and said no more. Another 35% of respondents actively set a limit of seven TV subscriptions but have yet to reach that maximum number. Limiting the number of TV subscriptions indicates (seven appears to be the magic number) that consumers are becoming more selective about the services they choose, seeking quality over quantity.
Usage and subscription
The report also shows that 44% of respondents spend more time on TV than a year ago, indicating a growing investment in the medium. Approximately 40% of Tubi or Pluto users rated these free platforms as the highest value, suggesting their investment in FAST content and user experience is paying off.
Furthermore, the research highlights that value perception among consumers is similar between ad-free and ad-supported versions of platforms. This suggests that consumers are willing to accept advertising if it allows them to access content at a reduced cost or for free. Providers should consider offering ad-supported and ad-free options to cater to a broader range of consumer preferences.
The study also finds that a significant portion of viewers (42%) sign up for a new platform but cancel shortly after. This trend is particularly prevalent among Gen Z viewers and those with children. Moreover, the research indicates that the more paid TV subscriptions a consumer has, the more likely they are to subscribe to a new service and cancel it soon after.
Assessing consumer perspective
Importantly, the HUB analysis provides insights into the consumer perspective on the streaming market and factors that influence their perception of value. The research looks at the complexity of the television landscape. It identifies how friction points, FAST channels, and economic factors affect consumer decisions and value perceptions.
Friction points and erosion of perks: Traditionally taken-for-granted perks, such as password sharing and content exclusivity, are starting to erode, leading to a higher level of friction among consumers.
Rise of FASTs: Competition in the subscription video-on-demand (SVOD) space is intensifying with the emergence of Free Ad-Supported TV (FAST) services. Media companies and TV manufacturers are entering this arena, further diversifying the TV landscape.
Economic factors: Consumer concerns about inflation and the economy’s state are additional variables shaping TV consumption choices.
Hub’s research offers insight into consumers’ evolving preferences and dynamics within the streaming industry. As the landscape becomes increasingly complex, understanding consumer payment preferences, value perceptions, and the optimization of content monetization is crucial for content services. By adapting to these changing preferences and offering compelling features, services can improve consumer satisfaction and grow revenue in this evolving industry.
Consumers grapple with an overwhelming array of choices and confusion in an era of rapidly evolving streaming services. The streaming landscape has recently witnessed significant shifts, with established players like Netflix and Disney+ introducing ad-supported tiers, Peacock discontinuing its free tier, and anticipation around the impact of Netflix’s crackdown on password sharing.
In this context, HUB’s Best Bundle study aims to shed light on how consumers adapt to the evolving TV/streaming space and land upon the the ideal combination of services that suit their viewing needs. It delves into the extent to which viewers opt for linear versus on-demand services, ad-supported versus ad-free experiences, and subscription-based versus free streaming services. By examining these variables, the study aims to decipher consumers’ choices when constructing their personalized bundles.
The research shows a notable decline in the average number of TV sources used by respondents from 7.4 in 2022 to 6.4 in 2023. This decline suggests that consumers are consolidating their streaming services and opting for a more streamlined approach to their TV viewing experience. While the average of TV sources declined, the overall demand for streaming services remains robust.
Though the use of streaming remained the same compared to last year, responses with an MVPD bundle dropped to 55% versus 62% in 2022. Consumers continue to embrace streaming as their primary source of entertainment, and the decline in the number of sources used does not imply a decrease in consumption. Instead, it signifies a more focused and curated approach to streaming, where viewers prioritize quality over quantity.
Interestingly the largest segment of viewers (63%) continues to be those who utilize a combination of traditional and streaming TV sources. This remains consistent with last year (64%) and indicates that traditional TV sources remain relevant in the face of the streaming revolution.
The study reveals that 27% of viewers plan to add a subscription to their existing lineup, which is higher than the figure in 2021 (21%). While this shows a continued consumer interest in expanding streaming options, it also suggests a slight decrease from the previous year, as 33% of viewers intended to add a subscription in 2022.
Furthermore, more than half of respondents (57%) state that they have utilized at least one free-with-ads (FAST) TV service, which aligns with 2022 findings. This suggests that despite the proliferation of subscription-based services, free platforms with advertising support continue to attract many viewers. Cost-saving advantages of free services are attractive, and advertisements for access to content are tolerable.
The study also highlights a decline in the percentage of viewers who use three or more of the largest subscription video-on-demand (SVOD) platforms. In 2023, only 43% of viewers report using three or more of these SVOD services, compared to 50% in the previous year.
Hub’s Best Bundle research points to a nuanced streaming landscape, with viewers seeking a balance between traditional TV sources and streaming platforms. While streaming services are immensely popular, traditional TV sources still play a significant role in viewers’ entertainment consumption. The addition of new subscriptions indicates that viewers are willing to explore and invest in streaming services, although the growth rate has slowed slightly compared to previous years. Further, as the streaming landscape continues to evolve, service providers must take note of viewers’ shifting preferences. Streaming platforms can attract and retain viewers in an increasingly competitive market by offering diverse content, personalized recommendations, and competitive pricing.
Full research report for DCN members only. Register to or login to download (on desktop see top right corner of page, on mobile the top center). Download buttons will appear at the top and bottom of the page.
DCN Members can access the video of today’s virtual event – a review of the study’s topline findings here.
Digital media companies recognize the important role of subscription-based models in monetizing content effectively. Understanding consumer behavior to support this business model is crucial for attracting and retaining subscribers, optimizing user experiences, and staying competitive. DCN’s new consumer subscription study: Digital Media Subscription Tracking offers a deep dive into consumer subscription behavior and covers a wide range of digital subscription services, including SVOD, MVPD, vMVPD, digital newspapers, magazines, and audio – and usage metrics for AVOD and FAST services. The report is DCN members only, please login or register to access (on desktop see top right corner, on mobile the top center).
The Q1 2023 report is available to all DCN members; all subsequent waves will be exclusive to DCN Benchmark participants as part of their Benchmark’s suite of reports offering timely market intelligence each quarter.
This quarterly research, conducted with Screen Engine/ASI, will identify trends and track market penetration, shifts, and growth in the rapidly changing media landscape. The first wave, Q1 2023, surveyed 1,893 adults 18+, representing the U.S. Census population by age, gender, race, and ethnicity. The sample was online-only and represented approximately 89% of U.S. households and adults 18+ with access to the Internet.
One of the study’s key findings is that the U.S. had more than one billion paid subscriptions in Q1 2023 across the digital media landscape – SVOD, MVPD, vMVPD, digital newspapers, magazines, and audio. This indicates that almost all online U.S. households (97%) subscribe to one or more digital media subscription services. On average, households subscribe to approximately nine different pay services when combining all seven digital media services measured in this study.
The SVOD service category has the most subscribers, with nearly a 60% share of total pay subscriptions, followed by MVPDs and vMVPDs, digital newspapers, digital magazines, and digital audio services. The study also indicates that 29% of all subscribers plan to add one or more services next quarter, while 26% plan to cancel one or more, with MVPDs potentially continuing to decline and vMVPD subscriptions potentially increasing.
The study also highlights that free, “ad-only” AVOD and FAST services will continue attracting more traditional media consumers, who tend to be older and watch more linear TV. SVOD with ads and AVOD services will provide a much-needed incremental and growing revenue stream, especially as growth for pay-only services that don’t carry ads slow their subscriber penetration.
The demographic profile of digital media service subscribers shows that the heaviest concentration of subscribers for all services combined are slightly younger (P18-34), more male (M18-34), more diverse (Hispanic and African American), family-oriented (parents with children under 18), higher income (households with income $150K+) and slightly more educated. This demographic profile is extremely attractive for advertisers, making the launch of more digital “hybrid” (pay + ads) services likely.
The Digital Media Subscription Tracking study offers digital content companies essential consumer research to support new revenue models and pricing strategies to stay competitive and retain their subscribers.
Please reach out to me at [email protected] with questions about the Digital Media Subscription Tracking study.
Full research report for DCN members only. Register to or login to download (on desktop see top right corner of page, on mobile the top center). Download buttons will appear at the top and bottom of the page.
In recent years, the traditional television and streaming video industries have undergone significant transformation due to the expansion of digital platforms and changing consumer preferences. To gain insights into these changes, Adtaxi conducted an extensive study, 2023 TV & Video Streaming Survey,exploring the evolving landscape of TV and video streaming with more than 1,000 U.S. adults.
According to the survey, streaming services have solidified their position as the primary mode of video consumption for most viewers. More than 80% of respondents report subscribing to at least one streaming platform, with Netflix leading the pack. The convenience of on-demand content, the wide variety of choices, and the absence of advertisements were cited as the primary reasons for the popularity of streaming services.
Streaming services are the preferred choice of video consumption for a significant portion of adults, surpassing cable (31%) and broadcast (11%) options. Approximately 42% of adults now opt for streaming services, with 35% accessing streaming content through their TV sets and 7% using personal devices. Roku predicts that this trend will persist and that an estimated 50% of all U.S. households will cut the cord by 2024.
The research also reveals that the cord-cutting trend shows no signs of abating. A staggering 75% of respondents report that they canceled their traditional cable or satellite TV subscriptions in favor of streaming services. The flexibility, cost-effectiveness, and customizable nature of streaming platforms have made them attractive alternatives to traditional TV providers.
Original content and exclusive deals
In the battle for viewership dominance, original content has emerged as a key differentiator among streaming services. The Adtaxi survey found that 68% of respondents subscribed to a streaming platform specifically for its original programming. Netflix, Amazon Prime Video, and Disney+ were identified as the top platforms known for their high-quality original shows and movies.
Moreover, exclusive deals and partnerships have become important strategies for streaming services to attract subscribers. This includes securing exclusive rights to popular sports events, partnering with renowned creators, and signing contracts with top-tier production companies. These tactics not only help streaming platforms stand out but also provide viewers with unique and diverse content options.
The battle of ad-supported streaming
While subscription-based streaming services dominate the market, the survey highlights the growing popularity of ad-supported streaming platforms. Almost 40% of respondents report using ad-supported services, indicating a willingness to endure ads in exchange for free or lower-cost access to content. This trend should encourage more advertisers to invest in digital advertising within the streaming space, presenting new opportunities for brands to reach their target audiences.
The 2023 TV & Video Streaming Survey sheds light on the ever-evolving landscape of entertainment consumption. The dominance of streaming services, the ongoing cord-cutting trend, the importance of original content, and the rise of ad-supported platforms all point toward a significant shift in viewer preferences and behavior. As the industry continues to evolve, it will be interesting to see how streaming services adapt to meet the demands of their subscribers while providing a seamless and personalized entertainment experience. The future of TV and video streaming looks promising, offering consumers a wide range of choices and content options that cater to the consumer’s interests and preferences.
For nearly two decades, I’ve had the privilege of helping lead media’s evolution, first as an executive at two U.S.-based companies that were early to market with streaming video products, and now as a digital transformation consultant working with a variety of international media companies.
Many of the global execs I meet these days are worried that they are behind when it comes to streaming—playing catch up with the U.S. But is playing catch up such a bad thing? I say it’s not. In fact, by “playing catch up,” late movers have an opportunity to learn two key lessons from the U.S. streaming market and thus serve viewers more effectively.
1. Streaming is a long-term investment
After several decades in which the basic methods of creation and distribution were relatively stable, digital technology came along and changed the game. Unfortunately, in the early days of digital, many U.S. media companies took a short-term approach to this massive shift.
Instead of undertaking streaming development as an opportunity to fundamentally transform viewer relationships, most U.S. media companies viewed streaming as an experiment or side project. This led to short cuts in product development. That resulted in dozens of copycat streaming interfaces that today all more or less look just like Netflix, for better or worse. This short-term approach also led to a lack of standards development. That resulted in dozens of measurement methodologies and little to no transparency in companies’ stated metrics for success.
Those who are late to market can take advantage of the learnings from this short-term thinking by setting expectations internally and externally about how long their transition will take. Investing long-term in more thoughtful products will strengthen viewer loyalty. Investing long-term in shared metrics standards will strengthen relationships with partners and investors.
Streaming video is a long-term investment in innovation. It is an ongoing commitment to continuous change. Executed successfully, streaming video should mean more value for viewers—increased options and the convenience of on-demand. And that will result in more loyalty for media brands and more value for investors.
2. Do what you do best
The U.S. is a singular entertainment market. It’s large, geographically and demographically diverse, and relatively affluent. The most game-changing media company from the past two decades of U.S. innovation—Netflix—was actually a unique by-product that arose from the proximity of Hollywood and Silicon Valley and the relatively early widespread adoption of broadband in the U.S. market. If your country is not the U.S., don’t assume your non-US-based media company should follow the same strategies as the U.S.-based giants. Your company doesn’t need to be the next Netflix. Nobody wants or expects that.
The U.S. has too many streaming services that are practically indistinguishable from one another from the viewer perspective. Many are stuck managing churn on mediocre products as opposed to building loyalty via truly excellent offerings.
Unfortunately, this came about because the media companies that launched these streaming services incorrectly thought they had to compete head-to-head with Netflix in a winner-take-all Hunger Games. Recognizing that there is room for many strategies and many types of streaming services in the U.S. would have saved many media companies from over-investing in the wrong places.
The lesson here is to chart your own path. You should know your core viewers and the nuances of your market better than anyone—and you should take advantage of that. Not having to compete amid the complexities and pressures of the U.S. market is an advantage for media companies in other regions. Latecomers can avoid the churn management Hunger Games by doing what they do best, focusing on what differentiates their brand rather than copycatting the struggling strategies of other media companies.
Similarly, while there is room for international brands in most markets, there are nuances to local cultures that can allow for native media companies to truly own their markets. This is also the best way to super-serve your audience: build out from your core identity while embracing new streaming technologies and models.
The bottom line
Let’s get one thing straight: streaming is not a war. The “streaming wars” are a narrative concept, convenient for headlines but ultimately an overly simplistic way to frame the latest evolution of the media industry. In fact, there are and will be many successful players, and as streaming further evolves, it will continually present new opportunities for media companies everywhere to entertain, inform, and engage.
The models might differ from company to company, but all should be investing in an ability to execute continuous evolution. Smart media executives can double down on a long-term investment in their core brands and on super-serving their audiences for continued success in their own markets and beyond.
While evergreen issues around trust and a focus on the audience experience peppered the first in-person DCN Next: Summit since 2020, emerging opportunities – and concerns – around generative AI were also focal at the event. Held at the Fort Lauderdale beachfront Conrad Hotel, the 2023 summit hosted a wide range of speakers from inside and outside the DCN membership to discuss the business and future of media, brand mission, omnichannel strategy, consumer preferences, and the impact of the challenging economic and regulatory climate.
Surveying the regulatory landscape
DCN CEO Jason Kint kicked off the event with a focus on current key regulatory issues that impact digital media. He emphasized that the focus must remain on aligning content experiences, advertising behavior, and data usage with consumer expectations. He also looked at the current state of antitrust regulation.
As Kat Downs Mulder, SVP and GM of Yahoo News put it: media brands have a responsibility, in asking consumers for their information through sign-ons, “to be protective of our asks and thoughtful about what we request.”
Kint’s points were hammered home by Shoshana Zuboff, Harvard Business School professor and author of the book The Age of Surveillance Capitalism. Zuboff delineated the history of privacy erosion leading to tech companies’ engagement in a “secret massive scale extraction of human data” and how regulation is a driving factor in reining it in.
The current drive towards antitrust and reining in the dominance a few players have over the ad market was a focal point for Utah Republican Senator Mike Lee, who addressed attendees via Zoom. He discussed a bill he is reintroducing “in a few weeks with bipartisan support,” which is designed to restore and protect competition in digital advertising and improve advertising transparency.
“Unfortunately, big tech behemoths like Google have inserted themselves as middlemen into this relationship, extracting monopoly rents not just on their own properties, but from every corner of the entire internet ecosystem.”
How brand focus empowers growth
The impact of emerging regulation is far from the only challenge media executives currently face. Speakers touched on inflation, supply chain disruption, European conflict, U.S.-China tensions, the ongoing impact of Covid, climate concerns, labor challenges, the erosion of trust in institutions, and the fight for free speech.
However, Almar Latour, CEO, Dow Jones and The Wall Street Journal publisher (pictured at top) said that challenges like these actually drive brands closer to their mission. For his brands, that mission is to go deep with products to provide truth relevant to different aspects of the business world, he added. This strategy is one he believes will lead to subscription growth.
Producing great products consumers love and return to over and over is indeed a driving factor in subscription strategy, as illustrated in a discussion between Julia Beizer, Bloomberg Media CEO and chief digital officer and Mulder. She noted that consumers value connecting with authoritative voices in brand podcasts and newsletters.
Indeed, building an infrastructure on the foundation of staying true to one’s brand is key to success, according to Bonin Bough, Group Black co-founder and chief strategy officer.
Brand, however, is not some vague marketing tool. Scott Mills, BET president and CEO said that maximizing brand requires a comprehensive data-driven ecosystem encompassing linear, streaming, and digital platforms.
Advocating for truth and accuracy
Maximizing brand value requires providing consumers with a source of much-needed, trustworthy information – particularly when others seek to tamp it down and create a void that is often filled with dis- or misinformation.
Addressing Florida’s Department of Education rejection of the AP African American History course, Mills noted that such actions will “drive us to allocate more of our resources or more of our attention to ensuring that our community—and people who value and respect our community—have access to accurate information.”
Clearly, the need for accurate information is a global one, though journalistic approaches and press freedoms vary widely. In his work as the manager for East and Southern Africa at the organization Journalists for Human Rights, Dr. Siyabulela Mandela has found that offering training to local journalists not only empowers them, but helps their work better serve local communities. He said that improving journalism’s role of providing checks to those in power is critical at a time when “there seems to be a shift from more democratic ways of doing things towards more totalitarian ways.”
Mandela advocates for an approach that enables Western journalists to reframe stories in East and Southern Africa and the Middle East with a more contextual focus on human rights by leveraging his organization’s local knowledge base. He favors the idea of a collaborative exchange program for mutual training with journalists from East and Southern Africa. Each, he pointed out, has much to learn from each other.
Evolving with the times
In addition to providing content that continues to address the needs of audiences, speakers discussed how innovation in storytelling provides creative and impactful ways to engage and inform audiences.
For Emblematic founder and CEO Nonny de la Pena, that means finding new ways to use virtual reality. Nicknamed “the godmother of VR” de la Pena illustrated techniques and showed behind the scenes insights into how some of the most powerful VR stories have been created. However, despite her enthusiasm, she said that given the fact that creators of misinformation often leverage powerful tech, it is essential to establish immutable provenance for footage to make it difficult to manipulate.
Encompassing non-traditional strategies to engage new audiences requires portfolio diversification, noted Alice McKown, publisher and CRO of The Atlantic. While the company has digitized its entire archive of 30,000 articles from its 165 years, it also has expanded efforts into creating new ways to leverage its IP, including immersive art exhibits, video, podcasts, book publishing, and events.
The National Geographic also has instituted strategies to evolve with the times while staying true to the brand’s core attributes. The magazine still attracts a relatively small, but incredibly loyal following, according to editor-in-chief Nathan Lump. These days, however, National Geographic brand reaches millions of people via social media, the National Geographic Channel on Disney Plus, virtual reality, live events, a travel business, consumer products, books.
Given the many ways that the brand now reaches audiences, Lump pointed out that National Geographic is the biggest it’s ever been in its 135 years. National Geographic boasts 714 million global followers across the major social platforms alone.
For The New York Times, Chief Growth Officer, Hannah Yang told the audience that its impressive subscription growth is achieved through three well-defined missions: a subscription growth mission to meet financial goals; consumer-facing mission offering desired options such as games and cooking; and platform mission to ensure that all parts of the business have the technology and data perspective they need to thrive.
“There’s never been a better time to monetize audiences,” noted Alex Michael, managing director of LionTree Group. He stressed the value of omnichannel strategy and bundling while discussing the investment opportunities his company is leaning into this year.
The power of omnichannel was echoed by a number of speakers, including board member Robin Thurston, Outside Interactive founder and CEO. He said, “The concept of single sign-on omnichannel helps connect the dots and create value.”
Richard Plepler, founder, EDEN Productions and former HBO chairman and CEO, reminded attendees of something he’s advocated for many years: quality over quantity. “More is not better; only better is better. I am not of the belief that tonnage gets you more subscribers – what gets you more subscribers is when brands deliver on their promise.”
As DCN members map out strategies for 2023, innovation and audience focus remain constant. However, to win amidst contemporary challenges developing a seamless omnichannel strategy, while staying to brand mission, will be key to attracting new consumers and retaining existing ones.
Discoverability, funding, IP ownership, and cultural sovereignty are topics at the forefront of how and to what degree streaming companies should be put under government regulations. As today’s over-the-top streaming platforms continue tonavigate emerging domestic rules and regulations, jurisdictions outside the U.S. have started to introduce new content and funding obligations for these services.
The ability to transcend borders has long been a defining characteristic of video streaming platforms: Anyone with an internet connection could view all the content. Initially, incumbent broadcasters and traditional distribution channels faced massive disruption as consumer preference shifted away from linear channels to the choice of what to watch and listen to from hundreds of options. With the wide adoption of digital distribution technology, streaming services became content creators themselves, while traditional content producers launched non-linear platforms to compete.
As is often the case with rapid technological advancements, legislation and regulation are now playing catch up. Local players in global markets have long made the case that the playing field must be leveled against the size of U.S.-based streaming companies, and officials have started to listen. Regulations are evolving to include localized content mandates and participation in domestic industry. Here’s how it’s playing out.
Europeans make early moves
In 2018, the European Union passed the Audiovisual Media Services (AVMS) Directive which included stipulations that the streaming platforms must offer a 30% quota of European content to European consumers. It also built a framework that allowed individual countries to mandate the streamers allocate revenues back into domestic production.
Right now, France is one of the countries with strongest local content rules. Streaming platforms must reinvest 20 to 25% of the domestic revenues back into French production. In France and elsewhere in Europe, since the regulations have been in place, Netflix has reached or exceeded the 30% local content requirements.
English language markets feel the squeeze
Because of the cultural juggernaut that is the U.S., other English-language regions have long felt compelled to shore up local production with support from their respective governments. This trend continues to be a flash point in debates about government overreach.
At the end of January, the Canadian senate passed Bill C-11 or the “Online Streaming Act,” an updated version of the country’s Broadcasting Act, which will allow the federal regulator to include international streaming services in its powers to levy fees and control how content is displayed. It’s expected to become law within a few weeks. Canadian governments have long sought to counter the influence of the cultural output south of its border, and the legislation attempts to extend those rules into the online space.
Similarly, Australia announced its own new “National Cultural Policy” around the same time. While it doesn’t outline the exact plans to regulate online streaming services, the Australian government laid out its goals to address the decline in local broadcasting revenues and bolster the creation of domestic productions.
While the report acknowledged the level of quality and popularity of the current slate of Australian content on the platforms, “these services have no requirements to make Australian content available on their platforms. The ready availability of mass content produced in other countries, particularly the United States, risks drowning out the voices of Australian storytellers,” read the Australian government’s cultural policy plan “Revive.”
While no longer part of the AVMS, the UK’s government continues to investigate the creation of rules so that the Office of Communication (Ofcom) will have jurisdiction over overseas streaming services. This recently came to a head when complaints about the Netflix docuseries featuring Prince Harry and Meghan Markle had no official avenues to be heard.
Canada’s new legislation stands out
The proposed legislation north of the border has faced headwinds from entities both large and small because of the unique nature of the proposed laws. “C-11 is a bit of an outlier. In that it extends to user generated content on platforms like YouTube or Tik Tok. The European example does not,” said the University of Ottawa’s Canada Research Chair in internet and E-commerce law, Michael Geist.
Major pushback has resulted in the inclusion of user generated content and subsequent amendments have been put forward to avoid some of the issues with attempting to put all online content under the Canadian regulatory umbrella.
In September, Disney and Spotify asked the federal government to be more flexible about what it considered “Canadian content.” The streaming services warned that certain material, while ostensibly produced in Canada with a Canadian cast, wouldn’t count under the current rules, which include Canadian ownership of intellectual properties.
However, it’s worth noting that trade agreements such as the North American Free Trade Agreement (NAFTA) and the Canada-United States-Mexico Agreement (CUSMA) include provisions that protect the ability of companies to trade in audiovisual services across the Canada-U.S. border. Already, the U.S. embassy has expressed reservations about the proposed laws violating non-discrimination terms of the free trade agreements signed by the two countries.
While the bill is slated to pass the legislature, much of the specifics will need to be determined by the arms length content regulator the Canadian Radio-Television and Telecommunication Commission (CRTC). So the final rules and the structure of the regulatory framework remains unclear and will be subject to a public consultation process.
Despite the efforts in international English-language markets to avoid being drowned out, English language markets still generally benefit from the sympatico of shared language with the largest content producing sector in the world.
“Those English markets have had significant success, attracting investment from large streaming services and large production companies,” said Geist. “To Canada’s case, it’s a thriving sector that’s based in part on tax, [and] part on proximity to the U.S. market. So I don’t know that that necessarily suggests that what you need is more protection.”
The streaming video marketplace is expanding and evolving at a breakneck pace. While the market was growing long before Covid, the pandemic lockdown spiked demand and cemented new habits for consumers across demographics. Consumers have devloped a ravenous appetite for streaming, which content providers are happy to satisfy.
Not surprisingly, the number of policy issues surrounding streaming video has grown at a similar pace. Some of these issues have been around for a while, while others emerged just this year. As with all expanding markets, it is critical to monitor regulatory and policy activities to ensure that the market is positioned for healthy growth. To that end, let’s review the current slate of legal, regulatory and legislative issues poised to impact streaming video companies.
New taxes and fees
A host of states and municipalities are attempting to extend franchise fees, which are typically levied on cable and internet service providers, to streaming video companies. Similarly, the Federal Communications Commission (FCC) is considering requiring edge providers (aka companies with apps and websites) to pay into the Universal Service Fund (USF).
The rationale is that the companies that provide high quality, high bandwidth content to consumers should pay for the infrastructure that enables consumers to access this content. Of course, this position fails to recognize the fact that franchise fees and the USF were initially established as a way for cable companies and ISPs to return the benefit they gained from public investment in their infrastructure.
Streaming video companies, however, did not receive any federal or local funding. While actions like these would be detrimental to the entire streaming market, they would disproportionately impact small and diverse content creators because they don’t typically have diversified revenue streams. Instead of levying new taxes on an emerging set of services, it would be better for Congress to continue funding broadband deployment initiatives, which helps level the playing field for equitable access.
In 2021, the FCC asked for comments on whether streaming companies should be required to broadcast emergency alerts in the same way that traditional television and cable providers are required to. DCN weighed in with big concerns about the technical and financial burdens of that proposal. We also noted that the costs would likely significantly outweigh the benefits when you consider the fact that consumers already receive these alerts on their phones. The agency prepared a report for Congress and appears to have shelved the proposal for now, but it’s worth monitoring.
Caught up in the techlash
Policymakers at the state and federal level have grown increasingly antagonistic toward big tech platforms. With each new scandal, we typically see a rash of bills introduced in an effort to right the wrongs. Unfortunately, sometimes those bills are overly broad, and they inadvertently affect streaming video companies.
One recent example is the Kids Online Safety Act (KOSA), which was introduced by a group of bipartisan well-meaning Senators after whistleblower Frances Haugen testified before Congress about Meta’s predatory practices with regard to kids on their platforms. The bill purports to address the role that “social media platforms play… in the mental health crisis for children and teens.” However, the bill would also cover streaming video companies which offer professionally-curated content in a safe environment – pretty much the polar opposite of social media services teeming with user generated content.
Data rights and consumer privacy
In the absence of a federal privacy law, five states have now passed their own privacy laws. Of course, these laws apply to a wide range of businesses, impacting far more than streaming companies. However, the new laws will certainly have an impact on how the sector develops, particularly on how consumer data is collected and used.
For example, the California Privacy Rights Act (CPRA) builds on existing California privacy law to provide consumers with robust rights to delete, correct and port data that companies hold about them. Starting next year, consumers will also enjoy easy ways to opt out of the sale or transfer of their data.
Meanwhile, big tech companies like Amazon and Google are battling with newer platforms like Roku, and a raft of advertising-supported video providers, to carve out space in the streaming business with an eye toward harnessing valuable flows of consumer data. If this plays out like the broader web, then whoever controls the data will corner the revenue.
As the streaming video market matures, more policy issues will surface. It’s the hallmark of every evolving sector. The question is whether the streaming video market can continue to grow with healthy competition or whether punitive fees and the collateral effects of dealing with the bad behavior of tech platforms will gum up the works.
To ensure that new entrants and innovation have the opportunity to flourish, DCN will continue to advocate for sound legislation that addresses the specified harms and that unnecessary hurdles are removed. Consumers have high expectations, so should we.
As consumers continue to cut the cord at high levels, we see a rise in the adoption of Connected TV (CTV) and free ad-supported TV streaming (FAST) services. What’s old is new again, and the reinvention of free TV is happening now.
Digital Content Next (DCN) partnered with Magid to uncover insights on how the streaming market is developing and to take advantage of the growth in AVOD and FAST. DCN’s new report, The Rise of and Best Practices for AVOD/FAST, exclusive to DCN members, focuses on FAST and the recent consumer response to these services. The report provides thought leadership and best practices for media brands looking to develop and expand a FAST business model.
The methodology includes:
Qualitative interviews with a subset of senior executives from DCN member organizations and secondary research to provide a competitive analysis, content and monetization strategies, distribution plans, and platform partnerships.
Quantitative survey analysis utilizing Magid’s proprietary Video Entertainment Study (VES) to offer consumer tracking, segmentation, and forecasting models in the AVOD and FAST marketplace.
Growth of AVOD/FAST
A post-pandemic mindset and rising inflation are changing consumer attitudes and needs. We see consumers leaning towards FAST services as they become more mindful of their budgets and cut their pay TV cords.
According to Magid’s proprietary data, 82% of U.S. households consume subscription video-on-demand (SVOD) and have at least one paid streaming service. While the growth in SVOD is near saturation, AVOD and FAST channels on streaming services are growing even faster. Since 2019, AVOD/FAST grew by 55% compared to 28% for SVOD. In fact, most Americans (62%) now report using at least one AVOD or FAST service as subscribers or viewers.
AVOD/FAST is now the second most common platform for viewing professional video content among those under 50 and the highest among millennials. The usage growth among 13-24-year-olds is even more pronounced (+15% points since 2020). Media brands must pay attention to the viewing habits of Gen Z, the largest generation, as they mature in the marketplace.
The intention to cut the cord accelerated in 2021 (36% growth among 18–64-year-olds and 70% among 18-34-year-olds between March 2021 and December 2021) and is driving the growth of CTV devices in the home.
Ad market and business opportunities
According to Variety, the forecast for the advertising revenue of FAST channels in the U.S. will total more than $6.0 billion dollars by 2025. This marks an increase of about $3.0 billion dollars compared with the estimate in 2022. Furthermore, nScreenMedia forecasts that the average CPM will also increase from $14 in 2022 to $18 in 2024 due to targeting and advertiser competition for inventory.
In an increasingly “platform agnostic” world, an important way for media brands to boost relevance is by being omnipresent. Today’s consumers do not care where they get the content they want. AVOD and FAST offer an opportunity to reach untapped audiences and to meet different audiences “where they are.” The growth of AVOD and FAST is creating a bigger pie rather than dividing the pie into narrower slices. Senior executives at DCN member organizations believe AVOD and FAST are more additive than cannibalistic.
AVOD and FAST are growing in audience and influence because they offer affordable and appealing options for consumers to access a wide range of content without paying for a subscription. DCN’s The Rise of and Best Practices for AVOD/FAST identifies essential strategies for media brands to navigate at the forefront of this significant shift in the current video distribution space.
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