Analysts have been warning for months that the accelerated growth of SVOD in 2020, helped by lockdowns, would mean lower growth rates in 2021, as potential recruits for this year were moved into the 2020 ‘net subscriber additions’ column instead. The latest quarterly subs figures from Netflix support their predictions, with the global SVOD leader reporting 4 million net paid subscriber additions in Q1 compared to 15.8m in the first quarter of 2020. The streamer is predicting just one million more net additions in Q2. As you can read in this related story, this year will be the worst for Netflix and Amazon Prime Video growth, in absolute terms, since 2015, according to one analyst and research firm, Omdia.
A longer term challenge for each individual subscription streaming service, when it comes to continued growth, is the increased competition for attention and wallet, especially given the recent launch of D2C services like Disney+, Paramount+ and Discovery+. Based on data from its Consumer Media and Entertainment Tracker, Ampere Analysis says one-quarter of U.S. homes are now using five or more SVOD services. The company says we are about to hit the ceiling for how much a home will spend on subscription streaming. And while Pay TV subscriptions are still in decline, cord cutting – which has freed up entertainment spend for the streamers – is slowing.
Not surprisingly therefore, attention is turning to how the subscription streaming market can keep growing at anything like recent rates, and Ampere and Omdia are two of the firms pointing to increased platform-streamer partnerships as the answer, with bundling and discounting at the core.
As Maria Rua Aguete, Research Director at Omdia, says: “To grow now, especially when faced with new competition, services such as Amazon and Netflix must gain access to new sources of subscriptions. In essence, this means being more open to integrated deals with consumer gatekeepers such as Pay TV providers and telcos. These deals will include further integrated libraries and even the bundling of SVOD services.”
Her company has added up the cost of SVOD stacking in the U.S. and believes it now matches that of a Pay TV service. The cost of taking Netflix, Amazon Prime Video, Hulu, Showtime, Starz and YouTube Premium would be around $68 per month. If you add the new D2C offers (Disney+, Peacock, Paramount+, Apple TV+, HBO Max and Discovery+) the figure rises to approx. $90 per month.
This demonstrates why partnerships, packaging and pricing are going to become more important. Talking about Pay TV onboarding of streaming apps, Omdia says that around 15% of all partnerships now include ‘soft-bundling’ where there is a limited-time, promotional discount for the OTT service, which is partially subsidised by the operator. Slightly more common is ‘hard-bundling’, where an OTT service is included in the standard operator tariff, possibly for an initial contract period. ‘Permanent hard-bundling’ removes time limits but may not include discounting. “This is growing in prevalence,” Omdia says.
‘Super bundling’ is where things get really interesting. This is a fast-growing model, though currently categorised as ‘low prevalence’ by the analyst/research firm. Here, multiple OTT video subscriptions are bundled into a single plan for a discounted price. Omdia has also identified ‘Subscription swapping’ as an emerging operator/streamer partnership model. With this, customers can change OTT services without breaking a contract and it may be offered via ‘digital credits’.
Ampere Analysis also believes partnership is a key component as we open the next chapter in the streaming story. Guy Bisson, Research Director at the company, picked out ‘Compounding’ as his big trend for 2021, a concept that encompasses adding and combining, and which in terms of streaming strategies means several things including:
- Combining paid with ad-supported business models (more hybrid services)
- Expanding the content genres in streaming services (e.g. news, sports and reality, as some services morph into a general entertainment offer)
- Combining content creation and distribution/retail under one roof (as seen in the D2C launches from the likes of Disney)
- Two or more media owners pooling their content in a single service – with BritBox and Salto style broadcaster JVs being good examples.
However, perhaps the most significant example of ‘compounding’ from his list is the pooling of streaming services into bundles. Speaking at Videoscape Europe in March, Bisson noted that having accelerated its growth trajectory because of Covid and the lockdowns, the streaming market must find ways to keep growing. “One way to do that is to combine services in a way that will allow us, as an industry, to break through the stacking [of SVOD services per-home] ceiling.
“We have reached the point of no return in the transition to streaming,” he observes. “But as more homes take more services, we are clearly reaching the point where we hit a ceiling and the growth will stop. The question is how we break through that ceiling, and one way is for platforms to seize the opportunity to combine services.”
Bisson is referring to onboarding partnerships between platforms and streaming service providers. Those platforms could include Pay TV operators but, as he made clear, companies like Roku and Apple (with their connected TV platforms) could also take up this role. Bisson also reckons the streamers themselves can bundle services into an offer if they have multiple streaming brands in their portfolio. He gave the example of Disney, which has Hulu, Disney+, ESPN and Star in its stable.
As Bisson pointed out, aggregation and the bundling of streaming services are not the same thing – streamed services are already aggregated on various platforms and exist as islands there, but he expects to see the growth of bundling with discounting as a next step. This process should be supported by better navigation between the streaming services, he adds.
Here, Bisson is referring to the way multiple streaming services can be integrated into the wider UI of a platform, beyond existing as standalone apps. You can see this in early Pay TV/streamer partnerships including at Sky where Netflix and Discovery+ content is surfaced within the general UI, including on the home page promotional content tiles and within on-demand picks, etc. Universal search and universal recommendation, where the platform/aggregator provides a line of sight into streaming services as well as broadcast, DVR and other VOD, so that any relevant content is surfaced, is considered a key part of this next-generation content discovery and navigation paradigm.
“Bundling and [next-generation] navigation will help put us through the [streaming service stacking] ceiling,” Bisson reckons. “Today, streaming services are priced individually and when you take one direct, that is fine, but once you have five it becomes quite expensive. It [the key to continued growth] is about encouraging partners to see the benefit of aggregation with packaging that offers a significant discount.”
Bisson adds: “The market [for subscription streaming services] is incredibly crowded so there is an opportunity to combine and to simplify.” He sees this as a logical next step for the multi streaming service household experience.