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  1. The streaming wars part two: Pandemic

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    Until late 2019, Netflix was the undisputed king of the streaming sector. It had competitors, notably Amazon Prime, but its subscriber base, content catalog and accessibility were almost unrivalled. 2020 heralded the much-anticipated ‘streaming wars’, with many media companies such as Disney, NBCUniversal, ViacomCBS and AT&T releasing their own streaming services. The competition was always going to be fierce, and then coronavirus came along. The global pandemic forced billions of people indoors for weeks and months, and many turned to the streaming services – old and new – for entertainment. A lack of live sport also drove many fans into the arms of the streaming services.

    Strong Q2 performances

    The streaming platforms’ second-quarter results reflected the millions of new subscriptions, with particularly remarkable performances from Netflix and newcomer Disney+. For the big media companies, streaming performance was a bright spot in balance sheets dominated by bad news in the form of closed movie theaters, canceled sporting events and major advertisers slashing their TV budgets. But as the world slowly transitions into a post-pandemic landscape, can the streaming services maintain their success?

    Let’s start with a round-up of the major players’ performances over the last two quarters.

    Netflix

    Netflix had an incredible Q2, adding 10 million subscribers to end the first half of the year, to a total of 193 million subscribers across the world. That was on top of an unprecedented addition of 15.7 million subscribers in the first quarter of the year. However, Reed Hastings, Netflix’s co-CEO, warned that this kind of growth couldn’t last, suggesting that the pandemic had pulled subscriber growth into the first half of the year. He predicted that the platform would attract just 2.5 million new subscribers in the third quarter, a prediction which caused Netflix’s share price to plummet.

    Disney+

    Many argue that Disney+, The Walt Disney Company’s much-publicized on-demand streaming service, is the big success story of the pandemic. It is the biggest streaming launch on record, with a huge 10 million subscribers in the 24 hours following its launch, and more than 60 million subscribers by early August – four years ahead of their target of 60-90 million subscribers by 2024. This is particularly impressive given that they have yet to complete their global roll-out. Including Hulu and ESPN+, both of which it also owns, The Walt Disney Company’s streaming subscriptions now top 100 million.

    Peacock and HBO Max

    It is still early days for NBCUniversal’s Peacock, which is ad-supported, and AT&T’s HBO Max, which is the premium version of cable channel HBO. Peacock launched in the US in mid-July, and at the time of writing has attracted 10 million subscriptions – a third of its 2024 target. Meanwhile, HBO Max launched in late May and has grown the pool of HBO and HBO Max customers by 1.7 million in the first half of this year, to a total of 36.3 million subscribers. It is helping AT&T to mitigate the effects of cord-cutting, although there are signs that HBO subscribers don’t yet fully grasp what the new service offers, or how and why they should get it.

    Is brand-supported streaming the future?

    It is indubitable that the coronavirus pandemic has created extremely favourable market conditions for the streaming platforms, both new and established. But, as Reed Hastings said, it’s possible that it has simply pulled 2020’s – and possibly 2021’s – entire pool of new subscriptions into the first half of 2020. To date, the streaming companies have focused on the production of high-quality content to lure new subscriptions and maintain revenue. But content by itself isn’t enough – Quibi’s unsuccessful launch is testament to that – and, what’s more, supply far outstrips demand: consumers in the US subscribe to an average of three SVOD services. The streamers will need to find new ways to deliver increasing value to shareholders.

    There has been some concern amongst advertisers about the growth of ad-free streaming, but many industry players now agree that brand support seems almost inevitable. With ad dollars always wanting to follow eyeballs, there are potentially billions of ad dollars up for grabs. What’s more, the consumer data that the streamers own will be of huge value to advertisers, allowing the likes of Netflix and Disney+ to compete with that infamous tech duopoly, Facebook and Google. Horizon Media CEO Bill Koenigsberg told AdAge earlier this year, ‘if they [the streaming companies] go that way, if they will be able to allow us to unveil the walled gardens and provide data back, then that’s an enormous competitor to the Facebooks and Googles of the world in terms of the audiences these platforms are going to attract and our ability to engage with them’.

    The big streaming platforms have huge tech capabilities which will allow them to create new ad models, formats and partnerships to drive revenue. However, they will need to prioritise consumer experience – part of the appeal of the streaming platforms is the low ad load, or total lack thereof, particularly for US viewers who often sit through more than 15 minutes of ads per hour on primetime TV. Brand partnerships will need to enhance rather than disrupt the consumer’s experience.

    A key moment in streaming

    While the streaming sector has been one of the few winners of 2020, it is far from certain that this success will continue. As the world continues to emerge from lockdown, the economic ramifications of the pandemic are becoming clear. Many countries, including the US, are in recession and unemployment is rising dramatically. Consumers will be looking for ways to make savings and non-essentials such as streaming subscriptions may well be among the first thing to go, particularly as restrictions on other parts of life ease. Netflix, Disney+ and their competitors will need to work hard to retain consumers and maintain their profit.

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