How streaming services are building resilience for the future
Image credit: Chernetskaya/Dreamstime
Subscription-based streaming services may be encountering a ceiling, but providers can still find a way around this issue to guarantee their future.
Over the last decade, subscription-based business models became ubiquitous across all types of media companies. Their potential was quickly noticeable as revenue for advertising was diverting elsewhere and media consumption patterns were shifting. However, the latest industry news paints a different picture.
During the first earnings call of the year, in April, Netflix announced that it had lost 200,000 paying customers, its first subscriber loss in over ten years. The information about the undisputed king of streaming services worldwide sent Wall Street into a downward spiral that resulted in its stock dropping over 20 per cent on the day of the announcement.
Similarly, CNN+ – CNN’s streaming service – shut down less than a month after launching due partly to poor subscription numbers, but also to a change of heart from its new parent company. And although Amazon Prime and Disney+ have been adding new clients non-stop in the past couple of years, industry experts argue that it won’t be long before their growth hits a wall. This begs the question: are subscription-based streaming services over?
Going by the previous examples, one could say so. Nonetheless, taking a broader look across industries, it’s clear that the trend is strongest in the subscription-video-on-demand (SVOD) realm, but not so much anywhere else.
Take the music industry, for example. Its streaming subscriptions grew 26 per cent in 2021, Variety reported. And, according to IFPI’s Global Music Report, paid subscription streaming revenues increased by 21.9 per cent in 2021. In Latin America, streaming alone accounts for more than 85 per cent of the market, and it is one of the regions with the highest revenue growth. So why the stark contrast between the two?
At first glance, it would seem like it comes down to truly specific reasons. In Netflix’s case, executives blamed strong expansion strategies from competing brands and password sharing. However, sticking with this explanation would provide a very narrow view of the future of the industry. And there are certainly other factors that all streaming service providers should have in mind going forward.
Currently, the world is recovering from a once-in-a-lifetime global event, which has brought on once-in-a-lifetime global consequences, and then some. The war in Ukraine, raging inflation, and supply chain issues that still linger from the pandemic have created a perfect storm of macroeconomic factors that have audiences re-evaluating which services they want to pay for.
According to a OnePoll survey, 57 per cent of respondents are considering cutting back on streaming services, with the average person going from five to three. Similarly, other surveys show that people are not willing to pay for more than two music streaming services at the same time. And, when it’s time to prioritise, only the strongest will survive.
Although it may seem like an ambiguous adjective, the strongest can be clearly defined by client satisfaction. Platforms that are constantly giving value to their customers are the ones that have the lowest churn rate overall, and the highest growth, during the initial stages. Viewers, listeners, readers etc will come back time and time again if they receive a product like no other. Eventually, it will even become a necessity, which will guarantee the company’s future.
Some streaming services have approached this by delivering a great quantity of content in an effort to appeal to a wide variety of audiences. Nevertheless, in my experience as the founder and CEO of Disctopia, I have found that the best way to create a meaningful relationship with our public is by giving them a unique product they can’t find anywhere else, curated to their liking.
To achieve this, creators and managers of streaming services have to develop audience research skills. These will allow them not only to know their customer’s preferences content-wise but also to develop new and better products to serve their needs. Most major media companies rely on their research to make informed decisions that shape their strategy. The good news is that it doesn’t take much to implement.
In the long run, any investment done in this area will pay back in full. And, although it isn’t a surefire way to prevent subscriber loss – because macroeconomic factors fall beyond any company’s control – it will surely come in handy when adapting to the next market shift.
Patrick Hill is CEO and founder of Disctopia.
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