Streaming content directly to consumers has not, as a business model, lived up to its billing – and its performance continues to decline as multiple services compete for the same share of wallet. What is more, competitors with diversified business models and other principal sources of revenue are expanding their market share, according to Accenture’s “Reinvent for growth” report.
The subscription video on demand (SVOD) market saw slowing growth in 2022, with far fewer new sign-ups. In addition, churn rates are up. In fact, the report revealed that 35% of consumers unsubscribed from at least one of the “Big 5” SVOD services (Netflix, Disney+, Hulu, Prime Video and HBO Max) in the last 12 months, and 26% say that they plan to cut one or more in the next 12 months.
Moreover, with the average number of SVOD services each consumer now has hitting more than 10 in the United States, three times as many consumers (20%) feel that this is too many compared with those who believe they have too few (7%). The market is no longer rewarding growth in subscriber numbers; it’s switching attention to profitability. Netflix’s share price, for example, has fallen by more than 50% from its high in October 2021.
● THE COSTS OF STREAMING
In addition, Accenture noted that content costs have spiraled up at the same time as media companies have made considerable investments in making the move to streaming. Those costs have not been met by proportionately rising subscription revenues.
The biggest players here, like Amazon, Apple and Google, have vast revenues and operating cash flow from non-streaming products and services that give them other ways of engaging and profiting from consumers. So even if they are not making money from video directly, tech players are profiting from the higher audience engagement with their other bundled products and services and streaming service aggregation, without having to play by the traditional financial rules of TV/film distribution or even today’s streaming economics.
● CONSUMERS WANT THINGS SIMPLER
The report also pointed that consumers do not wish to spend excessive amounts of time searching for content, trawling through multiple screens and apps to find what they want. Almost 3 in 4 (72%) consumers now report frustration at finding something to watch, which is 6 percentage points higher than last year.
Furthermore, a quarter of consumers (26%) – compared with 17% last year – now say it can take them more than ten minutes to settle on a choice. More than half (55%) are simply overwhelmed by the number of streaming services to choose from.
Consequently, more than eight in ten (86%) would be interested in a single service that captured and shared all their basic information along with content preferences. Almost four in ten (37%) say they would pay for this.
● WALLETS UNDER PRESSURE
As the market becomes more saturated, consumers are switching between services and churn rates are up across the board. With wallets already under pressure from inflation and uncertainty about the economy, discretionary spending on streaming services will be an easy economy to make, Accenture said. Many intend to do just that, with 39% of consumers saying that they will decrease their spend on SVOD in the next 12 months.
Ad-free content was seen as a major attraction of streaming, but consumers do not seem to care that much about interruptions to their viewing. In fact, almost four in ten (39%) will not pay to remove ads, and more are welcoming ad-funded content into their viewing mix, with 52% of consumers increasing their use of completely ad-supported video in the past year.
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