Subscription fatigue or subscription stacking?

The launch of new SVOD streaming services is not damaging the incumbent (not yet):

  • Netflix added 8.76 million paid global subscribers in Q4 2019 – its first quarter up against the Disney+. Global paid net subscriber adds totalled 27.83 million for 2019, taking Netflix to 167.1 million streaming customers worldwide. 
  • In the meantime, Disney+ has racked up more than 41 million app downloads in just two months since the service launch in November 2019.  

In the reality of the OTT world, most households will have one, if not both, of Netflix and Amazon Prime Video. For them, any new platforms will be seen as an addition to, rather than a replacement for Netflix and Amazon. Even Disney+ is likely to live next to Netflix. 

Overall, the subscription stacking will grow in 2020-2021.

Nothing suggests yet that people suffer from “subscription fatigue”, on the opposite:

1 – Subscription stacks are growing. 

Two, three SVOD subscriptions are the new normal among many households, Ampere Analysis says. 

2 – Subscription stacks give room for home-made optimisation strategies. 

The growing choice among SVOD, freemium, AVOD and vertical platforms like DAZN gives room for optimisation strategies: you can create your preferred portfolio of content genres while keeping your subscriptions flexible and less expensive than a traditional PAY-TV contract. 

3 – Subscription stacks are not a thing for only digital natives and techies. 

That phase is passed: OTT/VOD is on the edge of becoming mainstream. In several markets, including Europe, there are already more households with an SVOD than a PAY-TV contract. 

Growing adoption and lots of media coverage have educated the 45+ aged audiences: they are ready to jump on the OTT bandwagon. And they are the ones that still hold a PAY-TV contract. 

Looking at this chart, you see a time bomb for PAY TV and an opportunity to unlock for OTT: the 35-54 group is there, ready to “cut the cord”.

THEREFORE…

The real streaming war is not among the SVOD providers but between them and the legacy PAY-TV. 

For the newcomers in the global club of streaming platforms – HBOMax, Disney+ and the likes – the key to success will be less about taking market share from incumbent SVOD services such as Netflix, and more about unlocking new audiences worldwide.

There is a deep pool of PAY-TV subscribers that are the ideal customers to win. It is already happening, but 2020 might be the year of the snowball effect. 

Cord-cutting has already started.

In 2019, pay-TV cancellations at Comcast totalled 671,000 – bringing the cable giant’s total footprint down to 21.25 million subscribers. The European Sky Tv operations send mixed signals, since the launch of SkyQ – and the bundle with Netflix – helped Sky to compensate for the loss of PAY-TV satellite subscribers. However, if we look at Germany, Sky might experience a tough 2020, having lost the rights for the next Champions League (gone to Dazn and Amazon Video). 

There is an opportunity window for European broadcasters: the ones that act now and act boldly.

This. Will. Happen.

Consumers in many markets will increasingly combine some SVoD products with an AVOD broadcaster-led, and keep Free-To-Air as the third ingredient of an optimised digital TV stack. European broadcasters must create the right conditions to fully profit of this scenario:  

1 – they can leverage their best assets: 
  • familiarity with known brands and faces, 
  • advertising expertise, 
  • breadth of content as a differentiator. 
2 – they must step out of their comfort zone to rethink both competition and cooperations: 
  • Collaborate not only for co-producing or co-licensing content but also for acquiring, managing and monetising audiences: that includes first-party-data-sharing and common advertising inventories.
  • Think regional or pan-European, not market by market: time is tight to play this game. Amazon, Netflix or Disney+ overcame the barrier of fragmentation. And so must European broadcasters do.   

European broadcasters have assets to leverage.  

1 FAMILIARITY: KNOWN BRANDS AND FACES 

With OTT becoming mainstream and the 45+ landing on it, broadcasters have some strengths they can use: familiar brands and known faces. Do not underestimate the power of habits, also for SVOD/ADOV. SVOD users —despite the growth of original content offerings from Netflix, Hulu and the likes — still focus on the familiar. 

  • According to studies, almost 60% routinely return to their favourite traditional channels/programs. At present, nearly two-thirds of adults who stream video content use look for the things they already know they want to watch. 
  • One-third have a rough idea, and only 22% watch when they don’t know what they want before exploring their options. 

That is an opportunity for broadcasters to leverage familiar brands, local heroes, and develop narratives closer to the world of their viewers. European media makers know how to commission excellent originals, even with lower budgets than global platforms.

2 MASTERING ADVERTISING.

AVOD is an obvious choice for video platforms and broadcasters going direct to consumer. There are many audiences across Europe who have only known free to air television. For them, an ad-supported model is a more familiar and appealing proposition than paying for another SVOD. 

Viacom grabbed headlines in March 2019 with the US$340 million acquisition of Pluto TV, a 100% ad-funded streaming platform.  RTL Group took a big step ahead in 2017, with the full purchase of ad serving platform SpotX and the €29 million acquisition of advertising technology company Yospace. 

Done with care, i.e. balancing the level of sophistication in targeting and delivering campaigns while not disrupting the viewer experience, AVOD can be a valid opportunity for broadcasters in digital for the years to come.

3 – BREADTH OF CONTENT. 

Viaplay, the streaming service operated by NENT Group in Sweden, Norway, Denmark and Finland, is not only a European OTT pioneer but the best example of a regional platform that leads its market thanks to the synergies its ownership provides.

What plays to the strengths of Viaplay? The commitment to offer the most extensive breadth of content to its audiences, ranging from live sports to original drama, all-time classics and film premieres, as well as kids’ most-loved animation and series. In a region where people of all ages have become digital users since a long time, Viaplay does not suffer the competition of Netflix & Co., on the opposite: the local champion leads with a rich and well-differentiated offer. 

Providing this breadth of content in other European markets can be a financial challenge for most broadcasters. Still, it is also a crucial move to step in the OTT domain with a leadership position and a critical mass of audiences that drive profit from AVOD. That is why the newer players in the OTT/VOD realm must adopt cooperative models (joint ventures or any other coop agreements that allow cost/sales/monetisation sharing) and make region-wide plans, not single-market plans.  

To STEP OUT OF THE COMFORT ZONE means you need to undertake some fundamental mindset shifts: 

1 – Cooperate and rethink competition.

There is no room for dwarfs anymore. And it will take more than joint-ventures between two partners to compete with the giants. That is also an issue that deserves new thinking and better regulation consistent with realising a single digital market in the EU.

SALTO = France Télévisions + TF1 + M6
BRIT BOX = BBC + ITV
JOYN = PRO7S1 + DISCOVERY

2 – Think like aggregators. 

The “super aggregator” model is not exclusive for Telcos and PAY_TV operators that focus on the relationship with customers and the billing and offer bundles like KPN NV with Amazon, TELECOM ITALIAN with Dazn, SkyQ with Netflix and so on.

In Germany, JOYN+ brings together 65 live TV channels + 6 premium channels available in HD for the SVOD subscribers. The “one-stop-shop” approach is forward-looking and aims to solve a consumer problem that will soon emerge and become worse than the buzzwordy “subscription fatigue”: the cognitive distress to find yourself in front of too much choice and the dilemma of “where to go first to find stuff”. 

3 – Convenience and user experience: broadcasters must think like product designers.

The current development of alternatives, the new SVOD entrants, are not yet creating an issue for the wallets: they are creating a problem for the brains.

We spend so much time trying to find content through the clutter, that we either do not find enough new content or have less time to consume. That happens with Netflix too, as several pieces of user research confirm. 

Like human attention, patience is limited. That is why many of us are escaping the social feed: that abundant content that flies and gets lost in the feed is making the same effect of the too much, too fast food you eat. You get nausea. 

Consumer problem-solving will be the road to success for the new contenders. That is more than developing a sleek user experience. And is more than an algorithm to deliver recommendations. One-stop-shops? Super aggregators? More sophisticated curation? Metasearch engines? A fantastic challenge for developing new and better products.

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