Smarter Financials, Deeper Customer Experience Management Are Keys to Streaming Profitability in a Maturing Market
In the streaming business, the surging growth of the pandemic years is but a blissful memory. Fierce competition from a proliferation of new entrants, a slowing economy, and inflation affecting media producers and consumers alike have changed the game.
Media companies are now working to deliver compelling content with differentiated customer experiences at competitive pricing in an increasingly financially challenged and attention-constrained environment. They do so within what looks to be an increasingly zero-sum game for subscribers who take advantage of liberal cancellation/service-pause policies to hop from one service to the next as they chase hits or seasonal sporting events.
As households start to tighten their budgets, so too must streaming media companies quickly improve their financial performance and discipline on several fronts. In addition, to differentiate themselves as well as to hang onto–and maximize revenues from–fickle subscribers whose combined a la carte streaming bills are approaching the prices of the former cable/satellite bundles that caused the initial cord cutting, media companies must improve the customer experience. That all may sound aspirational or even theoretical, but we’re seeing major streaming players doing both right now. The advantages conferred will be real and sustained.
On the financial end, understanding production costs has never been more crucial. Fortunately, there also have never been better tools to understand those costs. Cloud-based solutions enable content accounting and planning freed from the shackles of dispersed spreadsheets that tell different (and, often, fanciful) stories.
While cloud-based content accounting will never erase the natural tension between creative and corporate, an ability to present a project’s financial status provides a factual baseline upon which to base reasoned discussions as to the best way forward. A single source of truth lends visibility into production spending, asset capitalization, and amortization, and then provides real-time data to dashboards that give executives up-to-the-minute insights into operational details, financial standing, and deal particulars. When costs stray from estimates, conversations can happen fast, and so can the adjustments needed to stay on budget.
When it comes to revenue accounting, a dizzying array of revenue sources–subscriptions, ads, licenses, in-experience purchases, merchandising, donations–demand a robust system for tracking it all. Doing so is critical in determining, in an environment with so many potential revenue streams, that you’re maximizing them all for each piece of content you’re streaming. Executives can run profitability analyses driven by advanced analytics and working on huge data volumes for a better understanding of their most profitable–and least profitable–customers, products, and channels. That not only helps unearth additional revenue opportunities, but also, thanks to the availability of comprehensive production-cost information, tees up a detailed look into the ultimate financial impact a particular show delivers. Such information can then inform future production-investment decisions and help squeeze more value out of a subscriber base whose growth rates are unlikely to match those we’ve seen in recent years.
Streaming companies are finding rights and royalties management to be an area particularly rife for automation. By moving rights and royalties’ management to the cloud, you gain full visibility into the rights associated with your content, simplify the management of rights and royalties, and boost the sales of your content. These solutions also automate the painstaking processes associated with intellectual property acquisition and settlement.
With respect to customer-experience management, a recent SAP survey of streaming users came back with a surprising result: Respondents said customer experience was as important to them as the content being streamed and the price, they were paying for it. So, customer experience clearly matters to customers, and it certainly matters to the streaming companies serving them. The ability to profit from capturing, understanding, and monetizing audience interaction data is paramount in staying ahead of the competition. Doing so has the dual advantages of upping your chances of retaining viewers while driving more revenue from those viewers through upselling, cross-selling adjacent services or goods, and finding niche audiences.
Success here will depend on analytics capable of teasing out individualized viewing habits from gargantuan datasets of tens of millions of users and associated in-house or externally acquired data. This is about more than microtargeting user recommendations. Ultimately, success in user retention will depend on curating fan experiences (as the sports business has done with good results) and creating communities (as Facebook does well).
Speed was paramount during the pandemic streaming rush, and the immaturity of hastily constructed supporting financial accounting and customer-experience management systems is now coming home to roost. Amid what appears to be an enduring market climate of thin margins and intense competition, forward-thinking streaming-media providers are recognizing the advantages that upgrading these systems can bring, and they are aggressively pursuing them. It’s not easy, they recognize. But it’s the only way forward if they hope to thrive in an environment in which operational efficiency and precision plus actionable insights into customer preferences far supersede speed to market as meaningful competitive differentiators.
[Editor's note: This is a contributed article from SAP. Streaming Media accepts vendor bylines based solely on their value to our readers.]