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Tags containing: "SVOD"

Industry-Research | Video

In a fragmented video landscape, viewers start online

Today’s vast television ecosystem combines streaming services, traditional pay-TV, and free ad-supported platforms, reflecting a sea change in how viewers find and consume video content. The scales are tipping in favor of online sources their first stop when seeking out video content. Over two-thirds (67%) of respondents report they turn to an online source first when they want to watch TV. Only 26% default to a traditional MVPD (Multichannel Video Programming Distributor) set-top box. Hub Entertainment Research’s new report, Decoding the Default, highlights an increasingly fragmented ecosystem where viewers lean more toward online platforms than ever.

From traditional TV to streaming

As cord-cutting and “cord-never” populations continue to grow, the number of viewers who rely solely on traditional pay-TV services is dwindling. According to Hub’s findings, more than twice as many viewers use both traditional pay-TV and streaming platforms rather than just one type. Audiences find that streaming platforms offer more options and flexibility than traditional TV. Deloitte’s Digital Media Trends report echoes this, noting that many consumers find streaming services more aligned with their viewing needs. They prioritize content that matches their schedules rather than set broadcast times.

Viewers’ SVOD stack

Viewers’ video-on-demand (SVOD) “stacks” are getting larger, with many people subscribing to at least three different services. The report shows that the percentage of consumers using three or more SVODs more than doubled since 2020, illustrating the growth of multi-platform use. This expansion is partially due to the massive libraries each SVOD offers; for instance, Netflix, Hulu, and Disney+ have extensive catalogs covering different genres and audience segments.

Yet, while viewers may stack multiple services, only a few platforms become their “default.” Netflix leads this default category, with 26% of respondents choosing it first. This trend toward Netflix as the initial go-to aligns with its status as a pioneering platform with an established reputation for both quantity and quality of content. Hulu and Amazon Prime Video follow while Disney+ and Max (formerly HBO Max) fall slightly behind.

Online streaming is the new “home base”

Hub’s findings underscore that, for most viewers, the default experience of “turning on the TV” starts with online streaming. About one-third of viewers say they now go directly to a built-in smart TV app, showing a 50% increase in usage since 2021.

The appeal of smart TV apps lies in their convenience. They provide immediate access to various streaming platforms without additional hardware. The transition to smart TV apps represents a natural evolution of how viewers experience TV.

Research from the Leichtman Research aligns with this trend, finding that 87% of U.S. households own a device connecting their TV to the internet, from smart TVs to streaming media players. This widespread connectivity facilitates using apps like Netflix, Hulu, and Prime Video, solidifying them as the primary sources of TV content.

SVOD loyalty driven by “favorite shows”

Hub’s report highlights a crucial driver of platform loyalty—exclusive content. When viewers have a specific favorite show exclusive to a particular SVOD, they’re more likely to remain loyal to that platform. This “stickiness” effect is essential in a crowded market where content variety can make or break viewer retention.

On the other hand, traditional MVPDs still hold an edge on live TV, particularly for sports and news. These content categories remain strongholds for pay-TV providers, appealing to a demographic that values real-time events. However, this loyalty is eroding. The report notes that nearly a quarter of MVPD users would consider canceling their service if forced to choose between platforms.

The growth of FAST

FAST services are also becoming a mainstay for many viewers, especially those who prioritize content variety over exclusivity. FAST platforms appeal to cost-conscious consumers who prefer a broad selection of programming without additional monthly costs. Their rise complements subscription streaming by offering a fallback for when paid services are unavailable or too costly.

FAST providers such as Pluto TV and Tubi are gaining traction as they offer a unique blend of on-demand and live content with a more traditional TV-like feel. According to a survey from eMarketer, over half of U.S. adults now use FAST services. For these viewers, the trade-off of ads in exchange for free content is more appealing than paying for an additional SVOD, further underscoring the complexity of the modern TV ecosystem.

Will MVPDs adapt?

The rapid decline of MVPD set-top boxes poses an existential challenge to pay-TV providers, who now face pressure to innovate or risk further market loss. Some MVPDs are pivoting to streaming bundles or hybrid solutions to capture traditional and digital audiences. However, Hub’s report suggests these changes may be too late. As smart TV apps and streaming services become the “default” choice for viewing, MVPDs could be relegated to a niche role unless they compete with streaming platforms on convenience, affordability, and exclusive content.

As more people rely on streaming services and smart TVs, the influence of traditional MVPDs is waning. Netflix’s leading SVOD “default” position reflects its early mover advantage and vast content library. Meanwhile, traditional TV’s staples—live news and sports—feel less essential as viewers increasingly favor on-demand content.

Industry-Research | Video

Ad-supported options drive SVOD sign-ups

According to Samba TV’s new report on viewership for the first half of 2024, over-the-top (OTT) consumption grew by 40% year-over-year, highlighting the rising demand for on-demand content.  However, as audiences shift from linear TV, offering streaming video-on-demand (SVOD), ad-supported options are increasingly vital for capturing and retaining viewers.

Meanwhile, linear TV continues its decline, with a 1% drop in year-over-year consumption and a 2% decrease in average daily reach. As the traditional linear TV audience ages, OTT services are starting to dominate the market. And, as the options and pricing models for SVOD proliferate, streamers are experimenting with a number of marketing methods to stand out.

Growth of ad-supported streaming and FAST channels

During the first six months of 2024, more than half of new SVOD sign-ups were driven by ad-supported options, indicating that consumers are increasingly willing to watch ads in exchange for lower subscription fees. Further, 33% of U.S. streamers now watch content on FAST channels. For advertisers, this shift presents ample opportunities to reach cord-cutters and engage with audiences in a more targeted manner.

As competition intensifies among streaming platforms, effective marketing is becoming more crucial than ever. Many streamers are ramping up their advertising efforts in response, with billions of promotional campaign impressions across linear and OTT channels. Paramount+ and Warner Bros. Discovery’s Max leverage their built-in linear presences to boost visibility.

Churn challenges

Churn is a relevant concern despite the consistent addition of subscribers to SVOD platforms. Samba TV cites Antenna data showing that the number of cancellations is rising to the point where the net additions dropped by over 3 million year-over-year. This high churn reflects a broader trend of “subscription cycling,” where users frequently switch between services to access specific content.

While nearly every household in the U.S. streams content, 44% watch only one or two platforms within six months. This highlights the challenge for streamers: keeping viewers engaged long enough to deter them from canceling their subscriptions. Streamers must optimize their release schedules, promote loyalty through bundling, and emphasize innovative content, such as live events, to combat churn. Importantly, content remains the primary driver behind subscription cycling, as viewers often return to previously abandoned platforms for highly anticipated new shows.

Streamers increasingly leverage bundling, which provides added value to subscribers. The report notes additional Antenna data revealing that users who subscribe to bundles like the Disney Bundle and Apple One (bundles up to six Apple subscriptions for one lower monthly price) are less likely to cancel their subscriptions than those subscribed to individual services. For example, Apple TV+ had a churn rate of just under 9% in March 2024, while Apple One’s churn rate was less than 4%.

Promoting content across a bundled portfolio helps reduce the risk of audiences churning after finishing a single show. Offering diverse content across multiple services can help prevent subscribers from canceling their subscriptions.

Viewer preferences for SVOD

Viewer preferences continue to evolve in the streaming era, with binge-watching becoming increasingly common. Data from Samba TV shows that audiences are more likely to binge-watch docuseries and crime shows when given the option. These genres drive binge rates by over 60%. In contrast, data shows that comedies and dramas are less likely to be binged.

Interestingly, binge-watching is more prevalent among diverse households and in warmer climates. Cities like Houston, Orlando, and Phoenix show higher binge rates than cooler coastal regions. Additionally, Black and Hispanic households exhibit a stronger tendency to binge-watch than white or Asian households.

Linear TV continues to serve a niche audience, particularly for live sports and news, but the growing preference for streaming platforms is undeniable. SVOD platforms, including those with ad-supported models, that effectively engage viewers by offering compelling content and value through strategic bundling are well-positioned to lead the rapidly evolving TV industry.

Industry-Research | Video

Video streaming landscape matures through nuanced growth

Video streaming services (SVODs) are entering a new phase of maturity, characterized by moderate growth in an increasingly crowded market. SVODs are shifting their focus from subscriber acquisition to implementing strategies to achieve profitable growth. Marketplace trends show that advertising and bundling services are integral to the next stage in the SVOD landscape.

According to Antenna’s new State of Subscription report, most new SVOD subscribers selected ad-supported tiers in Q4 2023 and Q1 2024. This practice will likely continue, as ad-supported subscriptions account for over half of the gross additions during this period. Notably, 61% of SVOD consumers opted for the ad-supported service, indicating a significant shift toward ad acceptance.
Antenna identifies subscribers in four distinct choice groups:

  1. Ad Takers – Always opt for ads.
  2. Ad Avoiders – Never choose ads.
  3. Ad Managers – Mix and match ad-supported and ad-free plans.
  4. Ad Oblivious – Have not encountered an ad choice.

With 38% of subscriptions now ad-supported, reflecting a 7-point increase from 2023, consumers are increasingly open to ad-supported options. This trend is further apparent by the growing segment of Ad Takers, which has increased by 11.2 million since Q1 2022.

Benefits of bundling

Bundling SVOD services proves to be an effective strategy for reducing churn. Disney and Apple observed a 2 to 6-point improvement in churn rates for their bundled services compared to standalone offerings. Bundling Disney+, Hulu, and ESPN+ helps retain more subscribers than offering each service separately.

Antenna’s Bundle Benefit Ratio (BBR) measures the potential upside of bundling. It suggests that most premium SVODs have more curious customers than committed ones. This indicates the potential for bundled offerings to convert these curious customers into loyal subscribers.

  • Curious Customers: Users who have either canceled a service or are currently subscribed to a service for 6 months or less.
  • Committed Customers: Users who have subscribed to a service for over 6 months and have not canceled it before.

All Premium SVODs, except Netflix, have a higher number of Curious Customers compared to Committed Customers. Netflix’s exceptionally low Bundle Benefit Ratio indicates a higher risk of cannibalization from bundled offerings than other services. Notably, Netflix’s bundling strategies have mainly targeted its Ad-Supported tier. Conversely, Starz and Max have the highest ratios of Curious to Committed customers, indicating substantial potential gains from bundling strategies.

Effective acquisition strategies

The method of subscriber acquisition significantly impacts customer lifetime value (CLTV). Users acquired at full price can have CLTVs that are 52% higher than those acquired via free trials. Full-price subscribers tend to have higher retention rates and greater long-term value. In 2022, 65% of SVOD sign-ups came at full price from day one, continuing into 2023 and Q1 2024.

Promotions also play a critical role in driving annual plan uptake. For instance, when discounted in late 2022, the uptake of Max’s (formerly HBO Max) annual plans increased more than fivefold. This demonstrates that well-timed promotions can significantly boost long-term subscriber commitments.

Growth and churn dynamics

The overall growth of SVOD subscriptions has slowed to a more moderate pace, with a 10.2% year-over-year increase compared to 18.8% in 2023. However, specialty SVOD services have outpaced premium ones, growing at 15.8% YoY versus 9.4%. This growth is driven by niche content that appeals to specific audiences, highlighting the importance of content differentiation in the competitive SVOD market.

SVOD services must optimize pricing and packaging strategies to drive healthy performance. Ad-supported tiers will continue to play a crucial role, with increasing consumer acceptance and the potential for significant revenue from advertisements. Bundling and effective acquisition strategies will also be vital in maintaining and growing subscriber bases. The video streaming industry is evolving towards sustainable and profitable growth. As SVOD services navigate the landscape, they must balance subscriber acquisition with retention strategies, leveraging ads, bundles, and pricing tactics to achieve long-term success.

Video

What the US and Europe TV markets can learn from each other

In an increasingly global market, it is vital to recognize that, while Europe and the U.S. may have many similarities, they also have notable differences. The good news is that there’s a lot to learn from these differences. No matter what your perspective, the “television” space is growing more complex by the day. Applying one world view to fundamentally different markets is a recipe for failure. Thus, it is critical that media executives realize the world is not black and white but consists of shades of grey.

When we talk about television, what we mean by “TV” can vary dramatically, depending on geography, distribution service, device and – increasingly – the type of content being viewed. These variations are critical to understanding opportunities in this space. For the purposes of our discussion here, “TV” includes but is not limited to: 

  • Over-the-air (OTA) broadcast channels
  • Cable & satellite-delivered channel
  • +s
  • FAST channels
  • SVOD services

All of the above may be accessed on mobile devices, laptops/desktops, and connected TVs. They are the primary (and most lucrative) content delivery formats for both traditional and new content creators and aggregators, who are most likely to be interested in our analysis. 

A key component of the challenges now faced by media companies is a false assumption that “one size fits all.” As we explore the strategic complexity of the streaming television market, compounded by the acceleration of AI integrations, taking a “one size fits all” approach is particularly risky.

Instead, each media company must clearly evaluate and understand its strengths and core competencies, and what these mean when moving in a new direction. In order to remain viable, it is imperative media players have the confidence to try new tactics. And, to truly innovate, they also need to get comfortable with the possibility of failure (as the tech industry has been).

The five key strategic questions

As they decide their next steps, media executives should be focused on five key long-term strategic questions:

  1. How can you prepare your media business for success and survival in a rapidly-changing, highly competitive environment?
  2. How can you attract and retain talent?
  3. How can you serve your current customers and acquire new customers?
  4. How can you grow revenue and profitability, sustainably?
  5. And, finally, what exactly is your end goal?

Streaming lessons the United States and Europe can learn from each other

What we present below are six key – deliberately brief – lessons that U.S. and European media companies can learn from each other as they develop and evolve their offerings in the global streaming TV marketplace.

Lesson #1: Ask the right questions

The number one lesson that European media companies can learn from the U.S. is that many major media companies neglected to ask those five questions soon enough. That particularly seems the case when it comes to the last question: The strategies of most of the major U.S.-based streaming companies seem to lack a clearly defined end goal. But the good news is that it’s not too late. In fact, late movers have an opportunity to learn key lessons from the U.S. streaming market and thus serve viewers more effectively.

Lesson #2: Understand the market

One of the major mistakes that the mainly U.S.-based SVOD streaming services made (at least up to now) was the assumption that the world looked like the United States and would act the same way. A study of the history of the U.S. and European television markets would have made it clear that, when it came to paying for television, both markets had fundamentally different characteristics.

For example, Americans are used to paying $100 or more for their television, Europeans are not. Also, European pay-tv penetration has typically been 30 to 40% lower than the U.S. (even lower in some markets). Europeans prefer national language content and use free to air content more. When it comes to streaming, both sides need to first understand the structure of their markets and then work out what solutions work best.

Lesson #3: Media tech is a long-term investment

Technology has forever changed the game for media, and every player in the content value chain needs to become tech-savvy. This means continuously educating oneself – and one’s team – on new developments in technology. AI is a perfect example of a technology that has already impacted media (and will continue to do so). And yet, many major media players still think that AI is something for their tech department or even a new “Chief AI Officer” to manage rather than something about which they personally need to invest time learning and educating their entire teams about.

It’s imperative to everyone in a media company – senior or junior – to understand how mass market consumers connect using technology. For example, have they experimented with writing a ChatGPT or Midjourney prompt? Have they recently visited Walmart, Best Buy or Amazon to learn how most consumers purchase a TV, and thus come to have built-in, bundled access to their products? Do they have TikTok accounts? YouTube, Facebook, Instagram, Twitter, or even LinkedIn? And so on. Technology is a constantly evolving space, both in terms of innovation and consumer behavior. Staying connected to these changes will allow media leaders to make better short-term decisions and long-term investments in their business.

Lesson #4: Do what you do best

When faced with the dominance of Netflix, instead of doing what they did best, many U.S. media companies simply tried to do what Netflix did – but not as well. This approach hasn’t made a significant dent in Netflix’s market dominance, which is measured as present in two thirds of U.S. households, according to Kantar, with 49% in 2023 viewing it as their most important streaming service.

While this short-term strategy has floundered, the top U.S. media companies have a) strong, resilient brands, b) expertise in creating world-class content and content pipelines and c) the best deal-making skills Hollywood can teach. So, their potential remains strong. The same holds true for European media players. If you aren’t U.S.-based, don’t assume that your media company should follow the same strategies as the U.S.-based media giants. Nobody wants or expects your company to be the next Netflix. Instead, your company should be the next version of itself.

Lesson #5 – Don’t lose sight of the bigger picture

CEOs and corporate boards face a multitude of pressures when it comes to decision making. They must actually run their companies and navigate continually changing sectors and wider trends. And, in most cases, they must do so under the scrutiny of shareholders who have a multitude of short and long-term interests. What management must not do is panic.

For European companies, one area this particularly relates to is the treatment of linear television. There is no doubt that linear television faces challenges, yet European executives must also be wary of writing off the medium. While viewing for “traditional” television in the U.S. hovers just above 50%, linear television programs still dominate the schedules in virtually all major European countries. That reflects both the history of how television developed in these respective markets and the demographics involved. Linear can still be a powerful tool for advertisers in Europe in a way that is becoming increasingly challenged in the United States.

Lesson #6: Be humble

Media executives must not fall into the trap of thinking that, just because they view the world in a certain way, then that will be representative across the population of their market, much less the globe. That kind of thinking can lead to severe business consequences. It is good business sense to recognize you do not know everything and act accordingly. If there is one lesson that can be said to be applied equally across both Europe and the United States, it is this one.

The bottom line

The bottom line is that whether European or U.S.-based, media companies are not in need of a one-time strategy implementation or new product launch. As our six lessons illustrate, these companies need flexibility of thought and to be prepared to accept the realities on the ground, instead of implementing “one-size fits all” strategies. As we move into a new phase of hybrid traditional TV-streaming business models and assess how to integrate AI, this is particularly important to keep front of mind.

Innovation

Interactive offerings and rich archives put the plus in CNN streaming

CNN is not new to digital. Its first iOS offering dates back to 2014. Things have changed a lot since then, though. Today, the market is overflowing with more than 600 streaming services and mobile apps from news and entertainment brands of all kinds. However, the company views its latest digital play as the most important step since Ted Turner launched CNN in 1980. With CNN+, the company is betting on an enhanced, interactive product that offers a truly premium digital experience.

As Robyn Peterson, CNN’s Chief Technology Officer, described the opportunity to me, “The New York Times has cornered the market in subscription text news. There is a white space in video news and there is not a video news subscription service of the caliber of CNN+. CNN is the only news organization with the resources, global credibility, and experience in video storytelling to offer a compelling product worth paying for.”

At launch, CNN+ offers an impressive slate of original and exclusive programming. They’ve dedicated roughly $100 million in development and a team of 500 staffers to the product, an investment that the company believes will set it apart from rivals, and compel free viewers to pay $5.99 a month for the enhanced offering. 

Interactive innovation

In addition to the daily live shows CNN viewers already know and love, CNN+ adds the news brands’ first interactive streaming programming. For example, “Interview Club” is a service it’s counting on to “give subscribers access to newsmakers like never before.” This offering invites subscribers to submit questions from their computer, tablet or mobile device live or in advance of daily scheduled interviews between CNN’s journalists and newsmakers 

“Interview Club fundamentally transforms what it means to become part of the story,” Courtney Coupe, Senior Vice President of Content Strategy and Operations for CNN+, said in a press statement. “Weaving this crucial element of interactivity into the core of CNN+ sets it profoundly apart from anything else that exists in the streaming marketplace.” 

Historic depth and cultural relevance

Another attraction (and a first for news streaming apps) is exclusive on-demand access to more than a thousand hours from the library of CNN Original Series, CNN Films, and CNN Special Reports. This positions CNN+ to be a one-stop destination to access Emmy Award-winning titles and 40 years of history as told by CNN. 

But CNN+ isn’t just opening the archives. Another selling point is the production of Pop Docs. These premium documentary specials, focused on pop culture stories, are more than an attempt to tap into our collective Zeitgeist. They are a part of the eclectic content arsenal CNN+ is counting on to expand its audience beyond die-hard news fans (the median age of a CNN viewer hovers around 64) and engage cord-cutting Millennials.

“With CNN+, we are expanding the reach and scope of the CNN brand and delivering additive content to our fans,” Peterson explains. “Offering content exclusive to CNN+ gives them something valuable worthy of pay.” The focus, he adds, is “global news highlighting our global resources around the world.”

Subscribe now

The monthly subscription package is priced at $5.99 (the same amount Fox News charges for Fox Nation, which launched in 2018). CNN+ is also offering early subscribers access to the “Deal of a Lifetime,” or 50% off the monthly plan – as long as they remain subscribers. 

CNN+ is also revamping its mobile app to remove friction and fuel subscriber numbers. Currently, CNN+ is not a standalone app. It is integrated into the primary CNN app (launched in 2008). It appears as a plus sign that features prominently in the bottom navigation bar to allow easy navigation between platforms. 

“The CNN+ logo and experience is also prominently featured on top of the CNN.com homepage for users to access the new streaming platform from CNN.com,” Peterson explains. While a user interface that is essentially a tab on a newly updated CNN app means more clicks, there are advantages to providing subscribers CNN+ and TVE (TV Everywhere) access. “We are working to make this the best experience for our customers, and part of that is featuring all CNN content within one CNN app so we can limit any potential customer confusion.”

This and other perks pave the way for CNN+ to achieve what Andrew Morse, Executive Vice President and Chief Digital Officer of CNN Worldwide and Head of CNN+, has called a “very ambitious but achievable subscriber target.” While Morse doesn’t disclose the exact figure, he has hinted that a bundled offering with HBO Max and Discovery Plus is on the roadmap. The $43-billion combination of Discovery with AT&T’s WarnerMedia will undoubtedly result in a plethora of assets and bundles. The question is: Will audiences pay for it? 

It’s tricky to call, particularly when the Corona bump that marked a surge in audience interest in subscription streaming services is ebbing. While the streaming market continues to grow, the pace of that growth has slowed significantly. Last quarterly earnings from most streaming service providers fell short of expectations, and Netflix even reported its lowest year of subscriber growth since 2015. 

With CNN+, CNN is making an ambitious premium play in a crowded market. However, its investment in new interactive offerings, as well as the decision to offer a deep archive may put it in a class of its own in a sea of streaming apps. 

Industry-Research

Finding success in 2022’s competitive streaming market

The pandemic influenced business and consumer ecosystems worldwide. New behaviors include wide spread adoption of cashless transactions, contactless shopping, Zoom calls, and virtual conferences. Today’s world differs significantly from the pre-pandemic norms of 2019. Deloitte’s new Technology, Media & Telecommunications (TMT) Report looks at our transformed landscape and offers insight into consumers’ TV viewing habits and video consumption and predictions for 2022.

TV evolves

While overall television viewing increased during the pandemic, that growth did not occur on linear TV. Deloitte’s report sees this year’s impact on TV broadcast as a tipping point. It attributes this to the changing television landscape to new platforms and rich content. The report cites declines in the U.K. and forecasts further decreases in 2022 across TV broadcast live, time-shifted, and on-demand. In all, the share of viewing in the U.K. for TV broadcasters will account for only 50% of video viewing on all screens.

As a result of declining viewership, broadcasters and cable networks are launching streaming businesses (i.e., Discovery+, Disney+, and Paramount+) to add reach and compete for viewers’ attention. Approximately 80% of U.S. households now have a paid streaming video-on-demand (SVOD)subscription, with roughly a 35% churn rate this year. Deloitte expects the younger European SVOD market to replicate the US model.

Managing SVOD 

Consumers are price-sensitive and likely to find less expensive ad-supported offerings to manage their wallets. Deloitte estimates that at least 150 million paid subscriptions to SVOD services will cancel worldwide. However, Deloitte forecasts that consumers will add more subscriptions than cancel in markets with high churn. In fact, the average number of subscriptions per person will increase. Deloitte sees churn rates at 30% in the U.S. for 2022 compared to 35% in 2021.

Attracting and retaining audiences 

Deloitte forewarns publishers that content development and acquisition costs are likely to increase. Therefore, the pressure to attract and retain audiences is a top priority. Their recommendations include:

Multiple tier offerings

Multiple pricing tiers will help protect against churn. Asia/Pacific offers multiple tiers from free, ad-supported video-on-demand (AVOD) to premium. They also provide service bundles with video, gaming, and music. Bundling different services allow providers to aggregate large audiences for advertising and helps prevent churn. Deloitte expects to see more multiple-tier and bundled offerings in the U.S. and European markets.

Partnerships

Partnering with telecom and cable TV operators offers access a sizeable mobile market. Partnerships can help SVOD providers with distribution, customer costs and offers a compelling bundled choice. Partnering with studios can help manage content development and attract a broader audience.

Better data usage

Use data to understand a customer’s lifetime value can develop more enduring relationships, especially with more-profitable age groups. Identify and track customer segments to create compelling content personalization, acquisition, and retention tactics. Establish a strong understanding of price sensitivity and content preference to find valuable subscriber segments.

Learn from the experts

Telcom and MVPDs spend years learning and managing churn. Leverage and learn from their expertise in maximizing customer lifetime value.

Manage a positive experience

Publisher SVOD services must deliver a valuable and positive user experience. It’s crucial to offer a good user experience from sign-up to cancellation.

Deloitte also reminds publishers to be flexible, be the prized alternative to the constraints of cable subscriptions and pay-TV. Churn is inevitable but controllable as competition grows in the marketplace.

Industry-Research

More people are streaming, but how sticky are SVOD services?

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.

Increased viewership

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.

Subscription services

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.

Cancellation

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.

Recommendations

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. 

Industry-Research

Churn closes in on customer acquisition as the priority for streaming services

About a third of households are likely to adopt a vMVPD service within the next year according to Parks Associates research service OTT Video Market Tracker, which analyzes the impact of new and existing video services in the OTT space. Pluto TV, Crackle, and The Roku Channel are the leading ad-supported OTT options, though Parks finds that no single service currently dominates the vMVPD market.

Parks latest report finds that one-third of broadband households have trialed an OTT subscription service in the past six months. The good news is that two-thirds of those trialing OTT services subscribe to one or more of the services that they test.

That said, this is competitive market filled with an ever-growing number of choices. Thus, Parks finds that churn is “particularly intense in the pay-TV sector.” They advise that “building a strong customer base over time and continuing to serve its needs through content” is the best way to prevent churn. Netflix, Amazon, and Hulu have substantially lower churn rates than less-established OTT players. However, they point out that, particularly where differentiation is limited (as in vMVPDs), tenure in the market may not be enough to produce loyalty.

Parks also finds that:

  • Given that vMVPD services are relatively new, service churn is high as consumers test the different options available. Significant subscriber losses by DIRECTV Now (AT&T TV Now) contribute to this figure.
  • A preference by some consumers for pay TV, service contracts, bundling discounts, and the hassle of switching providers all contribute to lower annual churn rates for pay-TV providers compared with OTT or vMVPD services.
  • The Pay-TVchurn figure for Q3 2018 includes all pay-TV services, including both traditional and vMVPD.

OTT services are increasingly moving beyond customer acquisition as they seek to build a sustainable customer base. The upcoming market entry of Disney+, Apple TV+, HBO Max, and NBC’s Peacock (among others) has caused many industry players to reassess their approach to retention and consumers’ interest in subscribing to multiple streaming services.

By better understanding consumer attitudes, motivations, and habits related to churn, service providers can more effectively create service experiences will reduce churn and create a loyal customer base.

Perspectives

Digital media in 2020: What lies ahead?

From the boom of direct-to-consumer (DTC) brands to the introduction of new OTT streaming services such as Disney+, 2019 brought significant innovation to the digital media space. As we begin 2020, it’s time to think about which media trends will shake up the new year. Here’s what the MediaRadar team sees on the horizon.

The year of paradox for linear TV

In 2019, it was estimated that 6.4 million paid subscribers stopped paying for television. In 2020, as OTT streaming services continue to gain control, an almost equal, incremental decline in number of paid subscribers is predicted. However, despite “cord-cutting” in the TV industry, linear cable and broadcasters are poised to have a successful year. This is due in part to several major TV events set to occur throughout 2020.

The 2020 presidential election will have politicians spending significant amounts of ad dollars to get their messages across. Some estimate that spending will approach as much as $10 billion – or almost $6 billion more than the 2010 election. Advertisers are also predicted to allocate heavy ad spend towards the Tokyo Summer Olympics, as well as other large tent-pole sporting events like the Super Bowl. This year’s Super Bowl is expected to deliver strong financial results, as Fox reported in early December 2019. In fact, 80% of the inventory had already sold at a reported $5.6 million per 30 seconds. That marks a 7%  jump from last year.

Amidst the evolving TV landscape, providing viewers with real innovation will become crucial for success. Keeping that in mind, in 2020, it’s believed that nearly all major broadcasters will either reboot or unveil their paid streaming businesses. While this is just the start, this shows broadcasters are committed to re-engaging with their audiences and future proofing subscribers.

Politics’ role in digital media

An exploding ad spend isn’t the only way the presidential election will shape the industry this year. The election is expected to take over much of the news cycle and political ads. Every platform will be scrutinized for accuracy more than ever before. Ahead of the election, digital ad companies are expected to face strong public pressure to ensure their political ad policies are tightly “buttoned up.”

Twitter recently announced they will be opting out of politics, disallowing political ads entirely. Google announced that they are restricting targeting capabilities for political ads and Facebook is predicted to follow suit, despite pressures to go further.

Based on these companies’ decisions, it’s likely that other media will feel the same pressures in 2020. It will be up to these companies’ leadership to navigate this evolving digital landscape during the election cycle. Foremost: an emphasis on clear and ethical business decisions.

OTT remains hot

Over the past few years, investment in the OTT space has been heavy and rapid. It shows no signs of slowing down in 2020. UBS estimates a combination of 16 media firms will spend $100 billion to produce content in 2020. Of that $100 billion, just three firms – Netflix, Disney and WarnerMedia – are projected to account for 25%, producing unique content for their viewers.

For the financial health of the companies competing in the space, it’s likely that this investment cannot last long-term. Bob Iger, Chairman and CEO of The Walt Disney Company, has acknowledged that Disney+ will probably not break even for at least the first five years. Meanwhile, AT&T has said the same of upcoming streaming platform, HBO Max.

Eventually, it’s predicted that end user prices will rise, ad-supported models will become more common – SVOD versus AVOD – and spend on content will decrease to ensure profitability. Being in the early days of the streaming wars, however, the major players are willing to gamble with losses now to gain profits later. In the fight to capture the attention, and monthly payments of consumers around the world, and to make the investment worth it, not all can win.

2020 outlook

2020 looks to be both an exciting and transformative year for digital media. The TV industry will shift focus as they seek to re-engage with audiences through paid streaming businesses and offerings. Major TV events, specifically the 2020 presidential election and flagship sporting events, will help sustain linear cable and broadcasters through the year. Investment in OTT is only expected to increase, especially as “cord cutting” continues.

Perhaps the biggest change in 2020, though, will be as a result of the state of politics. With politics playing a larger role in the space than ever before, media companies will begin adjusting their strategies and policies accordingly – a change that could have a lasting impact on the future.

Innovation | Perspectives

How Disney+ and AppleTV+ are changing the OTT landscape

It’s a big month for streaming. The launch of Apple TV+ and Disney+ are finally upon us. So it’s a good time for an update on the state of the streaming wars. 

In this strange new world, tech companies like Apple are investing in content, and media companies like Disney are investing in technology. So how does? all this effort stack up? A closer look at the content and ad spend of these new OTT major players provides some insight into the future of streaming.

Content spending among new OTT services

At launch, Disney+ unsurprisingly boasts a sizable catalog of Disney-owned content. The company has also announced that $2.5 billion will be allocated to producing more original content for the platform over the next 5 years. 

Conversely, Apple has opted for a small but mighty catalog. At launch AppleTV+ was armed with considerable “star power” to entice subscribers. The platform will host entirely original content exclusively available to AppleTV+ subscribers. And pre-launch advertisements reveal some of the biggest names in acting and directing.

Although these two major players bring promising new content to the OTT lineup, they will have to continuously find ways to retain value in the eyes of consumers.  

Monthly subscriptions to the top seven streaming platforms will collectively cost $61. Consumers will more realistically pick and choose the platforms they actually want to pay for.  These leaves companies pitching both price point and content.  

Clearly, these numbers indicate that Disney and Apple are attempting to join the royalty of OTT, made up of existing streamers like Netflix, Amazon, and Hulu, which all have their own originally produced hits. With the launch of HBO Max in 2020, AT&T’s WarnerMedia may join the club soon. 

With content creation underway and platforms officially launched, OTT services can now shift focus to conveying value to win the favor of consumers, who have more options than ever before. And that is where marketing and advertising come in. What does advertising an OTT option in an already crowded space look like? 

Apple and Disney spend big ahead of streaming launch

For now, let’s look at the two headline makers: AppleTV+ and Disney+. 

Here at MediaRadar, we found that both platforms only started running ads in late August. AppleTV+ quickly overtook not only Disney+’s ad spend, but the entire streaming space. In the month of September, AppleTV+ was the top ad spender out of all streaming platforms. This includes established players like Netflix, Hulu, and Amazon Prime Video.

To date, Apple TV+ has outspent Disney+ five times over on paid media. What’s more, AppleTV+ has not slowed their efforts now that the platform has launched. Ten days into November, AppleTV+ is on pace to once again be the top ad buyer out of all the streaming platforms this month.

The two companies differ in strategy, as well. Disney has promoted its new streaming platform as a whole, using clips from owned content to pitch the breadth of the platform. While Apple has been promoting its original content in stand-alone spots. So far, it has focused ad spend around eight shows in particular.

AppleTV+ may be outspending Disney+ on paid media. However, that does not mean Disney’s marketing push has been insignificant in any way. In fact, Disney has been orchestrating a massive marketing push using all of their various channels. 

This push includes everything from on-air endorsements from Tom Bergeron (host of “Dancing With the Stars” on the Disney owned ABC network), to billboard and bus ads around Disney’s theme parks, to QR codes on lanyards worn by Disney’s 7,000+ retail workers at various Disney store locations. In one of the more interesting moves, Disney posted a video on YouTube titled “Basically Everything Coming to Disney+”, using snippets of movies available on the platform. The video was over 3 hours long.

On top of this, Disney has rolled out packaged deal after packaged deal thanks to its extensive holdings and powerful partnerships. For example: Verizon announced a year of free Disney+ for both new and existing customers, and more impressively Disney announced a $12.99 bundle with Disney+, ESPN and Hulu (both of which are majority-owned and controlled by house mouse). Visa card holders who have a Disney branded credit card can even lock in a discounted price for 2 or 3 years. Apple, for its part, is including a year subscription to Apple TV+ with the purchase of any Apple product. 

Apple is almost on the defensive in this new world, playing as a tech company against media giants like Disney. No one says the best movies come from Apple today. They have a real deficiency in terms of changing perception that they are a place where you should go to watch your content.

In a bid to make that case, Apple has spent $20 million advertising its two biggest shows ahead of the launch. 

In contrast, Disney’s robust offerings, combined with constant messaging across Disney properties, may immediately drive Disney+ to the top. “Think of Disney like a giant pinball machine, with content and initiatives pinging between divisions in an effort to drive up the ultimate score,” Gene Del Vecchio, a marketing professor at USC, told The New York Times. 

With all this activity from the new platforms, and platforms like HBO Max and Peacock yet to join the fray, the streaming wars are heating up. It will certainly be interesting to watch how these companies market themselves as they fight for subscribers who will have many providers to choose from.

Featured Post | Innovation

Watch out, streamers: Disney+ just can’t wait to be king

In the amount of time it takes the average TV viewer to contemplate subscribing to a new streaming service, five new streaming services have appeared.  

That last part’s not actually true. But given the way streaming services keep popping up, it’s likely closer to accurate than either we or our wallets would like to believe. That said, there’s only one such service looming on the immediate horizon that’s capturing the attention of viewers in virtually every age demographic. Slated to make its grand debut on November 12, everyone is watching out for Disney+.

The origins of Disney+ date back to August 2016, when The Walt Disney Company acquired a minority stake in BAMTech, a spin-off of MLB Advanced Media, the digital media arm of Major League Baseball. A year later, they upgraded to a controlling stake in BAMTech and on April 18, 2018, Disney subsidiary ESPN kicked off their streaming service (ESPN+).

Picture this

By that point, however, Disney had long since seen the potential in constructing their streaming offering. They began setting things in motion, having already swiped back the rights to the Marvel and Star Wars movies from Netflix and set a deal to acquire 21st Century Fox’s entertainment assets.

If you’re wondering what this means in terms of content available on the Disney+ service, just sit back and spend the next three hours and eighteen minutes (give or take a few seconds) watching this trailer. As its title helpfully explains, it offers a glimpse of “Basically Everything Coming to Disney+ on November 12.”

And we’re back!

No, we don’t think that you actually watched all three plus hours. However, we suspect you couldn’t resist skipping around enough to see how much Disney, Marvel, National Geographic, Pixar, Star Wars, and other programming Disney+ is bringing to the table – and to your screen – when it bows next week.

Subscribe now

Unsurprisingly, The Walt Disney Company is making it very easy to secure subscriptions to Disney+ as they prepare for rollout. They’re also providing ample incentives to give it a try, whether it’s the 7-day free trial membership, the streaming bundle of Disney+, ESPN+ and the ad-supported version of Hulu for $12.99 a month. There’s also the deal where Verizon is offering 12 free months of Disney+ to all new and existing 4G LTE and 5G unlimited wireless customers as well as to existing Fios Home Internet and 5G Home customers.

Yet the question remains: Given all the other streaming services out there, will viewers really be champing at the bit to add Disney+ to their “collection” come November 12?

Watch it

Here are five reasons why Disney+ looks like a must-watch:

1. Disney+ is the new “Disney Vault.”

In the past, whenever Disney has decided to reissue various films, they’ve done so in an ostensibly limited-edition fashion. They assure consumers that, at a certain point, they’ll stop production and the film will  go “back into the Disney Vault” until such time as they decide to reissue it again. Disney+ is already being viewed as a virtual vault. However, viewers can access their favs whenever they want…for a nominal monthly fee, of course.

2. If you like Star Wars and Marvel movies, it’s now the only place you can stream them.

As we mentioned above, it wasn’t a good day for Netflix when they found out that they were going to be losing not only the Disney movies they’d had in their catalog but, indeed, the Star Wars and Marvel stuff, too. One need only look at the top box office blockbusters of the past decade to see how valuable those franchises are. And that’s not even contemplating the drawing power of the new original Star Wars and Marvel series that Disney+ is adding to their programming roster.

3. Those 21st Century Fox entertainment properties? Yeah, that includes The Simpsons.

Yes, yes, Avatar is in the mix, too. And that’ll be a big deal as we get closer to the release of Avatar 2. But Simpsons fans are a devoted bunch. Remember that FXX’s earlier deal with the series resulted in some record-setting programming and a great deal of viewership. However, giving those fans the opportunity to secure access to more than 650 episodes of the series – and the movie, too! – in an ad-free environment is enough to make them shout, “Gimme, gimme, gimme!” and subscribe post-haste.

4. The “come for the classics, stick around to see what’s next” rollout plan.

Disney+ certainly isn’t shirking on offering interesting and high-profile new programming straight out of the gate. This includes a Toy Story spin-off series (Forky Asks a Question), a new Star Wars series (The Mandalorian), and an extension of the High School Musical franchise with a tongue-twisting title (High School Musical: The Musical: The Series). However, Disney+ also has some deals on the horizon that strengthen the appeal of its debut. They’re understandably confident that no one will walk away from the service when they know they’re going to be getting a Monsters Inc. sequel series (Monsters at Work), a second Star Wars series that has Ewan Macgregor reprising his role as Obi-Wan Kenobi, and no less than eight new Marvel series.

5. Even setting aside the aforementioned sign-up deals, the standard monthly price is still a steal.

Of course, the definition of “a steal” is relative. That said, consider this: Disney+ is $6.99 a month, whereas Amazon Prime is $8.99 a month, Netflix is anywhere from $8.99-$15.99 depending on which plan you have, Hulu is $11.99 a month, and HBO Now is $14.99. No matter how you slice it, Disney+ is a bargain.

We can’t say that November 12, 2019 will be remembered as the day the sun set on Netflix and rose with Disney+ as the new king of streaming. But it’s evident that there’s a tussle on the horizon that’s going to put the battle between Simba and Scar to shame. And, hey, the good news is that ringside seats only cost $6.99 a month!

About the author

Will Harris has a longstanding history of doing long-form interviews with random pop culture figures for the A.V. Club, Vulture, and a variety of other outlets, including Variety. He’s currently working on a book with David Zucker, Jim Abrahams, and Jerry Zucker. (And don’t call him Shirley.)

Industry-Research

Content discovery is a critical component of SVOD success

More choice sounds like a good thing. However, it’s been shown that there is a point at which too much choice no longer improves perception of value. In fact, too much choice can leave you feeling less satisfied than having fewer choices to begin with. The proliferation of streaming services may well be reaching this tipping point, though arguably cable television has long suffered from choice overload.

The 2019 first-quarter Nielsen Total Audience Report looked at how modern consumers navigate the “paradox of choice” to decide what to watch. Nielsen found that, among adult SVOD users, only one third of them report browsing the menu of a streaming service to find content to watch. And, unfortunately, 21% will quickly stop watching if they are not able to make up their minds.

Given that about 70% of homes have a subscription video on demand (SVOD) service and 72% use streaming-capable TV devices streaming services will need to figure out the best way to keep users engaged with content on these platforms. At present, most streaming users will gravitate back toward their traditional TV preferences when they’re not sure what to watch

At present, almost two-thirds of adults who stream video content use the services to watch exactly what they know they want to watch. One-third will watch when they have a rough idea, and only 22% watch when they don’t know what they want before exploring their options. An interesting thing about video streamers is that—despite the growth of original content offerings from providers like Netflix and Hulu—they focus on the familiar. Almost 60% say they routinely return to their favorite traditional channels, 44% like to scan through traditional channel options, 39% scan the program listings, and 31% browse their DVR recordings.

Younger viewers are more likely to use menus and check out recommended programming, as well as to spend more time exploring, than older viewers. However, they are also the most likely to tune out altogether if they are frustrated and don’t find something they want to watch. Thus, it is critical for streaming solution providers to master content discovery as they seek to cement their place in consumer viewing habits.

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