Four investment areas streaming providers need to consider
As the pendulum swings away from subscription-based models, password-sharing runs amok, a growing number of consumers consider cord-cutting and ad targeting and measurement frameworks see major disruption, the video streaming ecosystem faces a number of ongoing and emergent challenges and opportunities. TransUnion’s Frans Vermeulen spells out four timely opportunities for streaming providers.
When streaming TV first rose to prominence, premium subscription video on-demand (SVOD) services dominated, and content creation and distribution were defining marks of success.
With increased competition in SVOD and ad-supported video on-demand (AVOD) offerings stepping up content libraries and user adoption, premium providers who don’t push past content creation and distribution as competitive differentiations will fall behind.
Building a long-term strategy for both SVOD and AVOD now requires investments in four key areas.
1. Diversify data to move beyond content acquisition and recommendations
Netflix wrote the playbook on using its proprietary ratings, browsing and viewing activity to power its personalization engine and inform content licensing and production decisions. But competitive SVOD services are gaining on Netflix by leveraging their own subscriber bases to generate content insights at scale. Further, per data from Ampere Analysis, streaming providers have collectively broken the $200bn mark on content investments, making it difficult for any company to sustain a business model predicated on outspending others.
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Content advantages are also short-lived. In a digital environment, users can easily cancel streaming subscriptions and are willing to hop between providers to watch the latest mega title. Moreover, password-sharing across households is rampant — especially for SVOD and hybrid ad-supported/subscription services. According to a study by CordCutting.com, 88m streaming accounts are shared, and only 60% of people pay for their own subscriptions. Why aren’t subscription-based streaming providers doing more to combat password-sharing? The simple answer is they’re scared that a crackdown could alienate subscribers. It might lower subscription revenues for SVOD, while hybrid services could take a hit to both subscription and ad revenues.
Diversified media companies like Amazon, Disney and Apple have used streaming data strategically by connecting in-app behavior with data on ecommerce preferences, device ownership, streaming audio engagement and more. These insights can drive everything from retargeting to brand placement, product recommendations and merchandising decisions. One revenue model available to all streaming publishers: data-driven advertising.
2. Drive streaming growth with ad-supported services
Most recent entrants to the streaming market incorporate ad-supported tiers into offerings. These include pure AVOD services like Tubi, Pluto TV and Xumo, along with entries like Peacock that rely mainly on ad revenue but allow viewers to pay a fee to see fewer ads — or even no ads. Analysts at over-the-top media platform nScreenMedia estimate that revenue from ad-supported streaming will nearly double over the next two years, surpassing subscription revenue.
Ad-supported models subsidize subscription fees, which is important because cost is a leading cause of subscriber churn and price sensitivity for digital services is on the rise. Almost a quarter of Americans canceled or reduced their digital service subscriptions in the last three months to curb spending, according to a Q4 consumer survey conducted by TransUnion.
At the same time, AVOD services increasingly offer content and user experiences comparable to SVOD — without requiring a login. That means that AVOD providers must rely on additional investments and partnerships to personalize content and take advantage of the data-driven, precision targeting and advanced measurement capabilities that make streaming so attractive to advertisers.
3. Focus on getting the ad experience right
Traditionally, ad loads are shorter in streaming TV — but to varying degrees. Reduced ad loads and more relevant ads are among the top reasons consumers choose ad-supported streaming over cable or satellite television.
Not only do AVOD services offer fewer commercials, but they often mimic basic cable; they offer content for free — including access to live programming — and can feature interfaces that mimic or improve on the linear experience. These characteristics could all prove persuasive to cord-cutting holdouts, especially those who value the viewing experience that cable and satellite TV provide.
As streaming media providers look to create a preferred, ad-supported consumer experience without sacrificing revenue, it’s clear that consumer identity — understanding who tunes in and their key attributes — will be necessary to build solutions advertisers value.
4. Create a picture of identity to understand your user base
In a fragmented ad environment like streaming media — where hybrid services and streaming device manufacturers control portions of streaming inventory — many sellers use registration data to create proprietary advertising solutions. From an identity perspective, this can be problematic due to the aforementioned password-sharing phenomenon.
Moreover, AVOD providers — which have limited if any registration data — have demonstrated that viable advertising business models don’t require subscriber data. The key is understanding consumer identity.
Both AVOD providers with account data tied to multiple households and free, ad-supported apps with no viewer-supplied data need to be able to tie multiple identity keys prevalent in streaming media back to people. A robust streaming media identity solution must precisely resolve identity signals to households.It also needs to include most streaming homes to drive targeting scale for advertisers.
When streaming media companies can correctly associate ad impressions to a robust and scaled understanding of each connected household, they can actuate more audience-targeted inventory, increasing yields and driving better outcomes for advertisers.
Frans Vermeulen is vice-president of market development, media and entertainment vertical at TransUnion.