Four Complicated Thoughts about the Future of Streaming

?Warning: Long Article with no easy solutions offered.

Subscription Video on Demand (SVOD) services have revolutionised the media industry. But like many technology-driven changes, its impact on the industry, and the how the consumer experience will look in the future, is yet to emerge clear. Unfortunately it’s commonplace to read articles detailing a very simplistic view as to how the future will play out. So, rather than trying to simplify things into one nice, easy solution, this article will look at a number of complicated thoughts around the future.

When trying to understand what the future will look like, it’s important to consider a) the lessons from the past b) the fact that consumer behaviour and business models do change, and most importantly c) that the future is likely to be a mixture of both of these.

When trying to understand what the future will look like, it’s important to consider a) the lessons from the past b) the fact that consumer behaviour and business models do change, and most importantly c) that the future is likely to be a mixture of both of these.

SVOD Stacking vs SVOD Aggregation. The short-term versus long-term view of future… maybe?

It’s somewhat disturbing to see the phrase SVOD Stacking (meaning to subscriber to several SVOD services) still being used as some sort of fascinating commentary on the industry. In the US 52% of households subscribe to three or more services (Ampere Analysis), and in Europe back in 2019 the last time research was done (and prior to Disney+) it was 29% and growing. On average a European country had 16 SVOD services (in 2020), so I think we can safely bury the view that SVOD stacking is something revolutionary. It’s not as if (unlike music Subscription services), that the content on each SVOD service is the same. (Now people subscribing to more than one paid-for music service... there's a question worth thinking about!)

For a while too it was believed that consumers would purchase only a limited number of SVOD services and that those services that didn’t establish their place in the market would lose out. While this is still fundamentally true, the longer services are part of consumers lives, the more consumers consider them a staple. At the same time, Internet connected TV’s have made the movement between the services better, making it seem less of an arduous task.

The ideal situation however, would be one platform selling the consumer one package that includes all SVOD branded services, and then integrates them into their own delivery mechanism for ease of use. So... why has it not happened, and would it find a substantial market if it did?

The ideal situation however, would be one platform selling the consumer one package that includes all SVOD branded services, and then integrates them into their own delivery mechanism for ease of use. So... why has it not happened, and would it find a substantial market if it did?

To understand why the logical event has not yet happened, let’s take a little look at history.

Distant Past: before the appearance of home video, consumers were able to watch content ONLY when the gatekeepers (content creators and distributors) allowed you to. You watched at the cinema or TV when they told you to.

Past: as Home Video became common place, and the rental market peaked, Studios took to mining their own back catalogue (assisted by the development of the technology with greater storage capacity and thus opening up the ability to sell TV series box sets). This reached peak consumer experience with the launch of DVD mail delivery firms such as Netflix and LoveFilm. At the same time, the biggest pay TV partners in each territory had signed deals with all major studios for new releases; and in an assertive move against piracy and social media, studios started to release tent pole films around the world at the same time. This, my friends, may well have been the peak time for the consumers ability to access the full catalogue whenever they wanted.

Current: strangely enough, the move to streaming giveth some, while taking away others. It gave us the ability to have entire series in one easy place, watching episode after episode... onto the next series... all so easy. But content is now clustered together, mostly by owner.?(Purely hypothetically, had Netflix not started to make its own content, and been remained just a platform, would this have happened? Possibly. But let’s be honest, profitability would been kept from Netflix by content owners, squeezing them whenever they wanted, so probably a moot point). Outside of “a Disney movie” no other content owner can legitimately sell their content as a category all by itself. And as content owners were forced into creating their own platforms, they reclaim the control of their content, with no desire to share. Providing us the consumers, with only the content they wish us to see. Sure it’s a lot, and sure it’s easy to see, but the ability to see a classic film when you want to (hello Casablanca), is restricted. Since the owners of?the rentable DVD market are now the owners of streaming platforms, there is no desire to allow consumers such freedom. A valuable asset from a content owner’s back catalogue can now be used to promote a holiday season or align with newer content. Just like the good ole days (see, Distant Past).

The remaining major content owners – Universal, Warner, Sony, and Paramount – are currently focused on securing their place in the US SVOD market, before exploring global rollouts. And it may well be the story of how well they are able to achieve that, that will guide us to the future.

?It still seems obvious however, that a platform that aggregated SVOD services?would be very attractive to consumers, particularly those still willing to pay for current pay-tv packages.?Dabby & Tivo in the US have created streaming agnostic (but expensive) platforms that provide you with all subscriptions in one place, with no separate logins. Certain big European pay-tv operators have signed deals to integrate VOD packages inside their own service, most notably by Telefonica’s Movisestar+ (the “+” is not a reference to it being an additional service or VOD service, it’s actually related to the rebranding of the service from Canal+. I’ll be honest, it can all seem confusing… there is another entire article to be written about the challenges of working in a global media role and trying to explain to others that all the Sky’s, Canal’s, +’s, Star’s and Canal Digital’s aren’t always related to one another.)

Attempts by Apple to integrate VOD services into Apple TV apparently failed because Netflix wanted to maintain control (that’s not even ironic), and Netflix also refused?to allow Roku or Google TV to allow those services the ability to search their platform for content.?The likelihood of a resolution to these sorts of disputes is not helped by platforms owning their own content and therefore likely to be accused of promoting their shows over others. Are Google going to give priority to a Prime title over one from Netflix? Almost certainly. And we haven't even talked about the challenge of the auditing of each other’s subscribers. Perhaps this sort of mythical future will only be allowed for a handful of neutral partners whose interests are not contrary to those of content owners. Once again, are Telcos, the slow-moving, technically obsessed, content-poor but asset-rich partners the ones likely to adopt this plan?

Still, it is notable that even those deals that have been done, don’t appear to have driven a dramatic change in consumer behaviour.?Commonly (but not always) the longer consumers are forced to behave in a way contrary to their best interest, the more their desire weakens. Are you now used to switching back and forth between services? Probably. If someone came along with another platform, but one which enabled you to integrate all your other SVOD services… would you? And would enough consumers do the same to make it viable??

?The Suddenly Endless Desire for Local Content (and the impact thereof)

As SVOD services expand their reach across the globe, they face a challenge that global media companies have never really had to face before. They need localised content. This is fundamentally because the most highly rated shows in most countries are locally made ones. UK TV audience measurement outfit BARB has just introduced the ability to measure time spent on SVOD services, along with Live and Catch-Up (though only those watched on a TV… so missing a good chunk of content on laptops, tablets & smartphones). Still – bearing in mind that, 95% of the most watched shows are from local broadcasters, and of local content. Now – before any misplaced octopus of outrage crawls to the surface – I’m going to quickly try and control this. Yes, the content on a VOD platform may reach a different audience to that of traditional Free to Air (which would be more valuable if they sold advertising, but they don’t), and yes the influence of the breakout hits on VOD platforms may carry a greater weight. Bot the point I am trying to make is that US-made content, even very popular and ground-changing content, can only take the streamer so far. As the growth of their subscriber base is now dependant on non-US consumers, they find themselves in competition with local broadcasters for content.

It is possible that the major SVOD services (Netflix, Amazon Prime & Disney+, henceforth known as “The Streamers”) could look to buying up or distributing the entire catalogue of a local broadcaster – something that Amazon is already doing with US-based partners such as Starz – but not all SVOD services seem to have such global plans, or desires to share revenue, or branding with someone else. So, unless the SVOD services are willing to strike such distribution deals, they be forced to create their own local content.

For certain countries that perform well at exporting TV shows (UK, Netherlands, Israel & Australia do very well with new concepts, Turkey & South Korea are notable for producing vast amounts of drama), this situation has been very profitable for the local industries. But as Denmark & Sweden have found out – as the centre of Nordic Noir thrillers – their small local industries have been stretched to breaking point.

As we are all vividly learning with the impact of COVID on the number of hospitality staff, in the short-term, the law of Supply & Demand struggles to work when there is no supply.

As we are all vividly learning with the impact of COVID on the number of hospitality staff, in the short-term, the law of Supply & Demand struggles to work when there is no supply. We tend to think of Supply & Demand as a short-term experience, but it isn’t. Supermarkets know they can’t just increase prices as supply tightens as the PR impact would be negative and massive. Similarly the shortage in a specific type of labour can’t be rectified overnight, as it takes time to train or relocate, and salary is not the only driving force behind career choices (If only we had a recent example of this… if only). There are a limited number of actors, producers, writers… equipment even, in these small markets. And in an industry which suffers from nepotism, expansion of supply takes a long time (FYI – Nepotism doesn’t just refer to family, it’s also about friends. And it’s commonplace for roles behind the camera to be populated with people already known to others. This nepotism is a notable reason why there are so few minorities in these roles. At least acting has a – albeit imperfect – casting process to allow new talent to break through). The expansion is not at all helped by the fact that budgets for productions are often based on existing prices, rather than taking into account any supply-side impact. So not only are productions discouraged from hiring inexperienced staff they need to train, they also don’t want to pay more than the perceived industry rate.

Finally, what The Streamers may see as ‘local content’, can often be the traditional output (Nordic Noir thrillers or UK costume dramas). And therefore local industries face pressure not to deviate or to be too creative. All of this at the same time as the The Streamers hovers up talent whose development was funded & supported by local broadcasters and institutions.

This economic challenge is not unique to the entertainment industry. So-called “Disruptors” achieve economic success by exploiting loopholes to compete against an existing industry without having to pay for the fixed costs or meet the legal requirements.?Examples of this include Ride-sharing apps who avoid legislation aimed at taxis, and social media sites which “share” controversial content but claim that since they are not a “publisher”, they are not responsible for distributing false or misleading information. Just recently European Telcos – who fund all of the expansion of telecommunications networks within their countries – have stated that US tech firms, who under the principle of net neutrality are able to take and monetize the lion’s share of network traffic, should be helping them fund network expansion.

If you don’t want to do advertising, how about Product Placement?

As viewership of traditional Free-to-Air & Pay TV shrinks, so does the advertising that funds it. But where will that advertising go? How will the advertisers be able to build their brands without the success of TV advertising? Currently most SVOD shows lack the sizable market in any country needed to successfully sell advertising spots (Catch-Up services such as My4 and ITV Hub in the UK do carry adverts, but these are often linked to campaigns also associated with the linear TV broadcast).

However what does exist for SVOD shows is product placement, and without those pesky OFCOM rules preventing alcohol, sugary food, or medicine being promoted, or the need for editorial justification before a product can appear.

Even without those “benefits” there are another couple of reasons why it can be attractive:

1.??????No traditional adverts on your VOD service means no upset Pepsi when they want to advertise on a TV show that features a prominent Coke can

2.??????Unless the placement is a verbal one, (where the actor speaks about the product), modern editing technology can allow you to change. The. Products. This can mean they change over time, or and here’s the slightly orgasmic bit… fuelled by your viewer data, you now have the ability to have addressable product placement…

Anyway before we get too excited, there are challenges with Product Placement.

Product placement is most effective – very much like a celebrity endorser or influencer – when the viewer is able to see a connection between the products “brand” and the assumed “brand” of the character or scene where it appears.

Product placement is most effective – very much like a celebrity endorser or influencer – when the viewer is able to see a connection between the products “brand” and the assumed “brand” of the character or scene where it appears. Basically, it has to be “Believable”. Sure, your TV show can take the money from anyone, but an out-of-place product placement won’t just affect the consumers opinion of the show, it also won’t work for the brand. And strangely enough, advertisers have long memories when it comes to something they perceive didn’t work. Even Bond films, notorious for some of the most eye-bending product placements in cinema history, have come to appreciate that fewer brands – specifically cars, gadgets, and alcohol – repeated more often, have a bigger impact than just taking anyone’s cash.

Additionally – and it’s in the name – product placement works mostly for “products”. It would be tough to find scripts with references to insurance, charities, or other services. So while product placement opens some doors even this does not answer the question about the future of advertising.?Like I said, complicated.

How do consumers find the content they want to watch, even if they don’t know it?

As peak TV continues and content providers and platform operators fight it out, consumers need to know where they can find content. Paramount demonstrated the conundrum faced by consumers by removing?Star Trek Discovery from Netflix internationally because they wanted to hold onto it for the launch of paramount Plus. Except… they had no date for the launch of their service. So Star Trek Discovery ended up on Pluto TV, a small free VOD platform… but not as a catch-up. Only shown on their live linear OTT channel.?

There are companies like Reelgood & JustWatch who aggregate the data from the numerous services and sell it to others. However the use of this data depends on consumers knowing what they want to see. We as consumers need guidance to be told what is new and cool. As much as we now like to think that the time of the professional critic is at its end, we still need gatekeepers. And this exists both with your existing subscribers, and those who haven’t yet subscribed.

Existing Subscribers: keeping subscribers active on your platform (and thus weakening their willingness to cancel) is dependent on them finding things they want to watch. New shows are valuable, but expensive. Finding content in your back catalogue that they want to watch is a much more effective way. However there are some key challenges with this, most about the delicious topic of meta data. Consider these scenarios.

A)?????A viewer of the Mandalorian has probably already watched all previous Star Wars content. So directing them to old content may be less valuable then you'd expect.

B)?????Someone who enjoys SuperStore, may like other American comedies, but they probably have already watched Big Bang and How I Met Your Mother on terrestrial television. So suggesting them to the subscriber merely makes your algorithm look basic.

C)?????Just because the subscriber watched one show with vampires (let’s say “What we do in the Shadows”, a satirical show based around ‘uncool’ vampires), does not mean that the subscriber will be attracted to every show about vampires. In fact a “What we do in the Shadows” fan is unlikely to be a fan of the “Twilight” trilogy, a teenage romance with EMO vampires.

But even with all the data behind your decisions at their fingertips… ?they [the Streamers] lack context. And that context is vital.

Obviously Streaming services are already well aware of the challenge in trying to keep you. But even with all the data behind your decisions at their fingertips (what shows you watched, how long, what time, in what order) they lack context. And that context is vital. Think of all the other influences that will impact your decision to watch a show. Who in your household was actually watching the show? What was your emotional state of mind when watching?

It might be possible to gain insight to your decisions based on interpreting other people’s behaviour, but without that level of understanding, all the data in the world is just going to be that. Data. And a streamer is only going to be able to make the same basic analysis.

Non-Subscribers: How do you reach?new customers that aren’t already subscribing? Growth of customers within existing markets is already becoming a challenge,?but increasingly vital as those consumers often pay a higher price for the service than customers in newer markets, and therefore are more profitable. But how to attract them?

As much as advertising new content is seen as the obvious way to attract new consumers, it can sometime feel like SVOD services seem to undertake advertising rather than marketing, and deploy a scatter gun approach reminiscent of Coca Cola's infamous, "50% of our advertising doesn't work, we just don't know which 50%". While this media blitz on other mediums (FTA TV, billboards, online & print media) is successful in attracting pro-active customers, how do you get unsure consumers who don’t have their finger hovering the keyboard?

A common method is to offer a taster, but rather than providing access to the SVOD service, a further option is to broadcast a taster (the first episode) of the new content on a Free to Air channel. Now traditionally Free to Air channels have bought content off other content owners, and traded advertising with each other and their Pay-TV compatriots. But how willing they would be to promote a competitor? The other option would be for the SVOD service owner to purchase their own Free to Air channel, giving them control over their marketing. Does this open the door for the return of general entertainment ad-funded FTA channel??

?The author has worked in Finance Transformation for twenty years, with experience in the licensing, media, and advertising worlds. With a past academic background in Consumer Behaviour he loves to hear from all sorts of people, their stories, challenges, and interesting insight they have, that can help others and make us think.