Competition within the VoD landscape continues to intensify, with the influx of new streaming service launches leading to households frequently switching, replacing, and stacking services. According to Kantar's "Worldpanel’s latest Entertainment on Demand (EoD)" data, Netflix continues to assert its dominance, present in nearly two-thirds of streaming households, whilst 49% of these households consider Netflix to be their most important streaming subscription. However, whilst this percentage has dipped from 53% compared to the same period last year, it’s an impressive statistic considering the heightened competition, with more than half of Netflix households subscribing to four or more services.
Netflix continues to set the pace for the industry. Their ad-supported tier continues to grow with 1 in 3 new subscribers across the markets Kantar’s EOD tracks, choosing this entry price tier during the third quarter. In addition, the implementation of password sharing restrictions has spurred further growth, particularly in the US and Germany. Disney+, Paramount+, and Apple TV+ have emerged as the leaders in terms of share of new paid subscribers in Q3 2023. Disney+ in particular experienced an exceptionally strong Q3, propelled by their most recent promotional price campaign in Europe, and the momentum generated by Disney+ Day, underscoring the effectiveness of their investments in core markets. Disney aims to leverage the forthcoming password sharing restrictions to drive further revenue growth. To accomplish this, they must ensure they build deeper connections with the more casual Disney fans, ensuring the subscription delivers sufficient value. Currently, almost 2/3 of households with access to Disney+ do not use the service on a daily basis.
For the first time, Paramount+ and Apple TV+ claimed the top 2 spots in terms of share of new paid subscribers. Both services thrived on the popularity of their respective hero titles such as ‘Yellowstone’, and ‘Ted Lasso’, which proved effective in enticing new subscribers. Notably Paramount+ and Apple TV+ now have a compelling advantage in the US market, sports content. Paramount+ benefited from the return of the NFL, while Apple TV+ scored with the MLS. Apple TV+ now only ranks second to Netflix when it comes down to subscriber satisfaction with quality of shows.
However, the greatest challenge facing services outside of Netflix lies in turning initial hero title attraction into long-term subscriptions. In an era where stacked subscriptions are prevalent, securing screen time is ever more challenging. Furthermore, amidst the cost-of-living crisis, households are seeking entertainment that justifies the expense. This shifting landscape requires services to effectively highlight their existing catalogues to keep users engaged and enthusiastic. The proliferation of ‘boomerang subscribers’, who consistently rotate services that fail to capture sufficient household viewing time, are still on the rise. The adoption, and push towards sporting content could be a way of catering to a core audience enabling user engagement to be maintained.
HOLIDAY FOCUS FOR PRIME VIDEO
Historically, Amazon Prime membership growth, and Prime Video growth have gone hand in hand. However, there are signs emerging that suggest Prime Membership growth is slowing, which in turn impacts Prime Video growth potential. The upcoming launch of their ad-supported service underscores their pursuit of additional revenue streams from Prime Video, which, whilst still growing, still lags significantly behind Prime Delivery in terms of importance within households. At present, 68% of Prime Members use and engage with Prime Video, with lowest usage recognised in Britian, and highest in Spain. Driving a higher level of Prime Video engagement from Prime Members is likely to be a key focus on the back of slowing Prime growth.
A persistent challenge faced by Prime Video users is the service’s interface. Despite substantial changes made just over a year ago, Prime Video continues to lag behind Netflix on subscriber feedback in terms of the interface being easy to use and quality of recommendations. With the holiday quarter now underway, Amazon will be hoping the strength of retail/delivery business will be able to persuade more households to invest in Prime Membership and turn drive engagement with the Prime Video service.
The third quarter saw great excitement and variety in the sporting world, with sports seasons both commencing and ending. Whilst it is often high-budget TV series and films garnering the headlines, sports provide a universal language and one with global scope. Streaming services have been investing heavily in sports rights acquisition in recent years, and in Q3 2023 Kantar EOD noted the highest ever percentage of new streaming sign ups that were due to live sport, at 19%. The migration of sporting content to streaming services is aggressively challenging traditional Cable/Pay TV. Live sports, alongside the news, were often the cornerstone of Cable/Pay TV, however with this gradual transition to streaming the value proposition is getting mor challenging to convey to hard pressed households. Cable/Pay TV household penetration down has dropped from 44% in Q3 2022, to 40% in Q3 2023, a not insignificant shift. In line with this, VoD services are placing a growing emphasis on sporting documentaries, appealing beyond the traditional live sports fan.