Audiences love streamed content. According to Statista, the worldwide number of transactional video on demand users worldwide is 258 million in 2018, with the prediction that it will reach almost 317 million by 2022.
According to Deloitte, by 2017 55% of US households subscribed to paid video streaming services. In fact, on average they subscribe to three on-demand services.
When asked (again by Deloitte), why they loved streaming so much, the first three reasons were predictable: they could watch when they want; they could watch where they want; and they could watch without commercials.
However, it’s reason four that is really the top one and significantly one that is under the control of the service providers. And this is that they value the quality of the original content offered. 54% of subscribers said they had signed up for a service specifically to watch original content.
We know that streaming services are producing excellent content. At the 2018 Golden Globe Awards (again admittedly very US-centric), five of the 11 awards in the television categories were not won by television companies. They went to Netflix, Hulu and Amazon.
But if subscribers like streaming, they are getting increasingly choosy about how they pay for it. And this is putting a strain on established business models.
Traditional subscription models are really under pressure. Too many channels they do not want (and with the content discovery problems of poking around vast EPGs) means that 70% of the Deloitte survey reported getting too little value for their subscription.
Add to this the growing numbers of millennials or post-boomers or gen X or whatever you call the coming generation. They have never subscribed to a television service and see no reason why they ever should in the future. This applies, of course, to traditional cable and satellite services as well as subscription streaming.
And talking of the not-too-distant future, here’s another technical challenge to the status quo. 5G telecoms promises ubiquitous high speed, high density data coverage. So why would you bother to install and pay for home broadband.
For years, triple play has been nirvana: selling people telephony, data and content on one bill, because that makes it very “sticky”. But if you don’t need fixed line telephony, and any device with a 5G chip has more than enough data, how are you going to sell content?
All of which might lead you to think that transactional VoD – pay per view – will be the way of the future. But that has its challenges, too. Most obviously it is even harder to solve the discovery problem. You know what you are going to get from a television channel, even if few of us ever bother to find out what that is for many of the hundreds of channels on offer.
But if you take channels away, how will you know what programmes are even out there? How will you know that someone has made a great drama about a schoolteacher who becomes a drugs baron, or about the inmates of a women’s prison, or even about the tensions and interactions between an aristocratic family and its servants a hundred years ago?
Without any guarantee that a sufficiently large audience will find your programme, how do you go to the bank manager and ask for the money? It is entirely reasonable to put together a business plan which says, “I need to borrow $40 million to make this series, but I have already sold it to NBC, TF1 and NRK and I’m sure we’ll pick up a lot more customers.”
Quite a bit harder to build a case which says, “I need to borrow $40 million to make this series, and with luck and some positive social media comments then a hundred million people worldwide might watch at least an episode or two, and I will get 20 cents a viewer an episode”. Especially as we have all grown very savvy about releasing our personal data, so the big data engines will have less to work with.
Pricing pay per view is also going to be sensitive. The Statista forecast predicts an overall rise in revenues of 17% between 2018 and 2022. At the same time the number of subscribers will rise nearly 23% in the same period.
Or to put it another way, the bottom line may be growing but ARPU will actually fall 5% in the next four years.
This feels like an insoluble conundrum. We want better content, but you have to guess what we want, and we are going to pay less for it – and nothing if we don’t like it. These are challenging times.
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