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How Will Premium Streaming App Subscriptions Evolve?

Navigating today’s streaming apps and subscriptions can seem unnecessarily complicated, particularly as paid subscription and free service apps from major content companies often sit side by side, even appearing to compete with each other. Is this a necessary condition, what factors are driving it, and how is it likely to change? Evan Shapiro, CEO, ESHAP, discusses with Daniel Trotta, Product Manager, Content Engagement & Monetization, Warner Bros Discovery, and Jennifer Jones, Head of Global Business Affairs and Content Growth, Conde Nast, from this clip from their panel at Streaming Media Connect 2023

Shapiro notes that, due to several factors, a consumer can only engage with a limited number of apps at once. On a phone, he says, “There’s only so much room for so many apps on that first screen. The unlimited number of them doesn't really matter at the end of the day because the consumer tends to use about five to seven.” He asks the group, “Do you think we're going to see more ‘Maxing,’ more Discovery Plus and HBO Max combining into one, now adding a CNN to it? And what do you think are some of the blockers of getting us from perhaps where we are in a cluttered ‘paradox of choice,’ to one with fewer walls between the gardens [which is] a little bit simpler to navigate?”

Trotta says, “I think the number one blocker, to nobody's surprise, is all the money that cable throws off. That's why companies didn’t jump into MSNBC or Fox News or CNN earlier and with two feet because you can't start screwing up that relationship with the Multichannel Video Programming Distributors (MVPDs). I think that's going to continue to be an issue. Even Max doesn't have a hundred percent of what's on Discovery Plus because there's still enough viewership and interest in the Discovery Plus service to warrant it being a standalone thing.” He mentions a point Shapiro earlier made about the issue of paid and free apps from the same service both on a user’s phone. “That is a very scary proposition for me,” he says.

“What is?” Shapiro says. “The combined free and paid ecosystem in one?”

“Yeah,” Trotta says. “Removing the friction for users to pay you more or pay you less based on how much they want to use your app at the time, because you want to be able to count on somebody as a subscriber six months down the line when you're launching your next thing in order to be able to invest in that next program.” He cites an example of a more frictionless subscriber-retention approach. “Hulu lets you pause your subscription for 12 weeks,” he says. “If the thing that you're watching isn't on air, you could pause it for 12 weeks while it's off air, let it come back. That's an amazing feature. But at the same time, it brings up the question, do you lean into that sort of consumer behavior, or do you create even more barriers against it? And if I was betting, I would say it's the second one. People will eventually start creating more barriers to that behavior to get between the [free and paid], to get the predictability that lets you do good long-term planning.”

Jones says, “I completely agree with the need for companies to have long-term planning. I think that as a business affairs exec who often sits in the back rooms to do all the planning, the amount of indecision in the marketplace right now is higher than it's ever been and is causing kind of this ‘throwing spaghetti at the wall’ approach to see what works unintentionally. I don't think anybody thinks they're throwing spaghetti at the wall, but they end up having to do that because they're consistently adapting, and everybody wants more certainty so that they can plan. But I would note that even if you have certainty, you can't always plan, even if you know have a certain amount of subscribers, you don't know that this show that you're going to make next is going to even hit that.”

Jones notes the different approaches for audience attention taken by different providers. “The Roku model for FAST is measured in terms of audience attention. So you always have to have enough good stuff. And then the streaming model is more like, ‘Come here once and stay!’” She also highlights the legal hurdles for content availability. “Some of the content's just not available to be merged or moved over, or you're going to have to pay or…”

“Have ads run inside of it,” Shapiro says. “In the case of Netflix.”

“You just didn't get those AVOD rights,” Jones says. “So it's not available for your new product. And to have it be available, it will be another five years, 10 years, or you'll go back and pay more for it. Sometimes these big decisions that we all think are super strategic and [are the] determination of the future of the industry are sometimes premised on like, ‘Oh, we didn't negotiate that because nobody told us to.’ And so I think a lot of the backroom stuff is determining a lot of the strategy.”

Shapiro says, “Every contract is really just a revision of the last contract, versus a whole new slate…could we start from a completely clean slate contractually? No, you can't…”

“I firmly believe that most contracts and deals are done in a way the easiest deal to make is to say it's exactly what you already agreed to,” Jones says. “We just changed one thing. That's it, but just one thing. That's all we change if you agree to it! But the problem is that then you're turning everything into a version of something else. When you think about broadcast or cable, you got one run and one rerun at a set time in one country. Streaming now is unlimited runs anytime you want in every country in the world. That's not a version of the other thing. It's so much different, and I think all the systems are trying to slowly, in order to get consensus, accommodate just small things. And so we've ended up at this place where the friction is so high that there are clearly industry impasses that we're dealing with right now. And so I think on behalf of all backroom folks everywhere, we have to figure out a way to be a little bit braver to say, ‘Yes, it is a version, but it also is new. And how do we proactively think about accounting for the new?”

Learn more about a wide range of streaming industry topics at the next Streaming Media Connect in November 2023.

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