Navigating the 'COVID Content Collapse:' What's Next for Streaming TV
The past year has seen an incredible increase in streaming viewers, with major platforms—Netflix, Amazon Prime Video, Hulu, and Disney+ have all experienced staggering subscription growth since February 2020. Still other data shows that more than 25% of consumers added at least one streaming service during the pandemic.
In the months ahead, perhaps the biggest new competitor in the streaming space isn't another subscription service (aka SVOD), but instead, the proliferating new entries in the FAST (free, ad-supported streaming TV) category. According to one recent report, the average American viewer uses about seven different streaming services and most—79% to be precise—said that they would rather use free, ad-supported streaming than subscribe to another paid service.
With vaccination rollouts on the upswing, many consumers are feeling more hopeful. There is an end to the pandemic in sight. Will the end of the pandemic, though, lead to a subscription streaming service cutbacks?
As stay-at-home orders come to a close, previous forms of entertainment resume, and some consumers feeling the financial pinch begin to question some of their impulsive pandemic purchases (like that additional streaming service), the short answer may be … yes. We can, and should, anticipate a ripple effect in streaming TV consumption trends.
Defining the COVID Content Collapse
The "COVID Content Collapse" is the idea that as we near herd immunity and the end of what has been a horrific pandemic, many consumers will start to re-evaluate their subscription streaming services. While pandemic-induced behaviors have led to an uptick in streaming TV services, there has also been an uptick in churn. The same study that cited that more than 25% of consumers added a streaming service during the pandemic also concluded that 23% of respondents reported having dropped a service in November 2020 (this number up from 18% in July 2020).
As we reach the end of stay-at-home orders, cord cutters will continue to grow in numbers. As that pool deepens, cord cutters may lead to an initial spike in the adoption of paid streaming services; however, those adoption rates will plateau as consumers start to also take a harder look at their financial spend habits. With many still navigating the harrowing depths of the COVID recession, it's important to recognize that consumers will likely only continue to become more intune with their financial spend in the coming months. What started out as a free trial and a sense of “entertainment escapism” at the start of the pandemic can quickly turn into a monthly financial commitment that simply does not justify its entertainment value.
What This Immediately Means for Streaming TV
This is where the FAST (free, ad-supported streaming TV) market comes into play and gets interesting. According to TiVo's Q4 report, the average American viewer uses about seven different streaming services; and 79% of those respondents said that they would rather use free, ad-supported streaming TV than subscribe to another paid service.
FAST has all the benefits of a paid streaming subscription service, without the cost. There was an entry surge of new market players in the last year alone, with Pluto TV, Peacock, Xumo, and our very own DistroTV popping onto the scene, to name a few. It's no surprise the market is experiencing a growth explosion; it chose exactly the right moment in time to make its debut. Cord cutters are multiplying like wildfire, which means linear TV is becoming a less and less effective way to reach the younger demographic. Advertisers cannot afford to miss out on reaching such a large population segment, which means FAST matters as a video distribution format. Now is the time for brands to align with emerging FAST services, or risk falling behind.
What's next is always the most interesting question. One of the few things we know for certain is that life will continue to be uncertain. But we can take a look at the few things that we do know. Streaming TV puts consumers in control. For the most part, gone are the days of “channel flipping” out of boredom. Streaming TV services are smart; they aim to learn and adapt to viewer behaviors. Therefore, when a viewer logs in to stream a certain show or movie, it is an intentional act. This means that viewers on streaming TV services likely have a great deal of investment. They are interested, they are dialed in. They are, therefore, more likely to sit through advertisements and really watch and listen.
The barrier to build new streaming linear channels has also dropped considerably. Viewers fit one of two molds: they either like to “lean in” (actively search for what to watch) or "lean back" (watch whatever's playing at the moment). Streaming has evolved to cater to the needs of both those viewer types. At the inception of streaming TV, we saw many viewers spend an inordinate amount of time deciphering what to watch.
Now, streaming TV's technological capabilities have improved and there is the ability and ample opportunity for FAST services to build new, linear streaming channels that provide viewers with content that will resonate, so that even the pickiest of "lean in" viewers can now more easily settle in, lean back, and watch content that interests and excites them.
This, in turn, means massive whitespace of potential for advertisers to take advantage of FAST services in the months ahead. The streaming TV market's fast adoption rates and improvements in real-time, dynamic ad insertion allow advertisers to tap into the viral wave and ride it. This allows advertisers to hitch their efforts onto a piece of trending content and effectively spread their message algonside it, at a scale and capacity previously unheard of in the TV market.
Further, there is opportunity on the streaming TV services themselves to take interactivity to new heights. We're starting to see it happen in select markets; for instance, with viewers live streaming esports and actively communicating with the audience during the game. What if the future took that a step further? What if we begin to see not only audiences talking amongst themselves, but also audiences interacting directly with the shows? We saw a nascent form of this with Netflix's Black Mirror; that's just the beginning. Perhaps the future looks like custom channel packages for individual viewers based on watch habits with advertisers able to resonate with their target demographic at a level previously unseen. Only time will tell, but in the end, it all puts the viewer directly in the driver's seat: the ultimate end goal.
DISH Media's Andrew Tint and Redbox' Chris Yates discuss the challenges of launching a free ad-supported streaming TV (FAST) channel in an increasingly fragmented and crowded OTT marketplace at Streaming Media Connect 2021.
Streaming Media's Tim Siglin and Harmonic's Rob Gambino discuss findings from a recent streaming industry survey on the timeline for new and expanded investments in addressable advertising and why it hasn't taken the industry by storm in this clip from Streaming Media Connect 2021.
The number of pay TV subscribers will grow by 380 million from 2010 to 2024, but total global revenues will fall by 14% to $177 billion during the same period.