As many have noted, the Super Bowl is more than just football, it’s the biggest advertising event of the year. In 2020, fans watching everywhere will be bombarded with advertisements for Disney+, Hulu and Apple TV during the commercial breaks. This shows the unmistakable march of streaming services as they hustle for prime position in front of consumers.
This is a battle that has been buffering for some time. But we can now clearly see the shots being fired and the first casualties, too. Both Sony and Walmart have pulled the plug on their streaming services PlayStation Vue and Vudu in recent months. But the most apparent evidence of attrition in the streaming wars was revealed in Netflix’s most recent results — with the current king of the castle missing its forecast for subscriber growth for the second quarter in a row and losing around 130,000 U.S. subscribers.
Netflix is under tremendous pressure to keep hold of the market it pioneered. The world’s largest traditional media groups, as well as new tech players, are beginning to bite away at its market share. The Walt Disney Co., Google, AT&T’s WarnerMedia and Comcast’s NBCUniversal all have streaming services either in the market or launching imminently, while Apple TV+ marks a significant foray from tech into entertainment.
Players like Disney can rely on an encyclopedia of owned content and a strong traditional media network, and Google, Apple and Amazon can rely on a variety of alternative revenue streams and hardware to fund their streaming ventures. Apple has unveiled plans to include Apple TV+ for free with new devices, while aggressively undercutting rivals with a $4.99 monthly price. Netflix, meanwhile, is forced to invest around $15 billion a year in developing original content to keep viewers engaged, with its most basic streaming plan at $8.99 per month.
Substitution Play
This suggests consumers have some difficult decisions ahead. Analyst reports reveal that while a significant number of subscribers may pay for two video streaming services, the proportion falls considerably for three or more. There is a real question over subscription saturation in entertainment as, beyond video streaming, music, sports and news media are all moving to subscription models.
Streaming services need to consider how they can stay in the fight. Content needs to be able to cater to a variety of tastes. It is difficult to marry having a diverse portfolio of content with a high-quality one, though, as the level of investment Netflix dedicates to original content shows.
Comcast offers bundle packages with Netflix and Amazon Prime alongside traditional TV. That’s interesting, because while much has been made of cord-cutting, Samsung recently pointed out that 44% of its user base are actually cord-shavers — that is, they consume both streaming video and linear TV content. This is an important point and highlights the gap between TV and digital video audience measurement. Marketers and media owners alike want to know how to bridge the gap between conventional linear TV and all things digital, especially connected TV and streaming OTT.
Another option for streaming services is embracing an ad-supported model. Ad-supported streaming services make up the majority of the market — YouTube, Hulu, Roku and Amazon have all achieved significant growth by offering consumers an advertising-funded, free service and a “premium” subscription option. It’s unclear whether Netflix, Apple TV+, Disney+ or HBO Max will switch to offering ad-supported models in the future to sustain their content investments.
This is a tricky line to tread: Streaming service providers will want to identify a sustainable model but not one that risks consumers disengaging as their viewing is interrupted. Ad-supported models are attractive as they break down barriers to entry for consumers, while also providing a different revenue stream for the platform.
The ad-supported experience of the streaming services from traditional players like NBC, ABC, CBS, Viacom, Fox, Discovery, A&E and Turner still has room to improve. New streaming platforms and advertisers are also still figuring out how to best work together. Marketers want to be able to control who sees their ads and how many times across all these different platforms, yet today each of them operates in a silo making this very difficult.
Reliable Data Is Key
With the acceleration of content creation, the likelihood of ad-supported models increases and the success of these models hinges on marketers being able to effectively plan, buy and measure holistically across all platforms and content. To avoid any trust issues, streaming players need independent technology platforms to give marketers the access they need to their data. As traditional TV ratings continue to decline, this is advertising’s future playing field.
Consumer time and money are finite. As competition among streamers heats up, the players are becoming increasingly aware of the challenge of growing and keeping their slice of the video-on-demand pie. Hitting “peak subscription” suggests there is a lucrative option for streaming services to tap into audiences who don’t want another subscription but are still hungry for content. We will likely see more services turn to ad-supported models to keep user growth and stay in the fight.
