Streaming wars
The trend towards ad-funded streaming is particularly pronounced in SVOD’s largest market, the United States, in which over-the-top subscription revenue is forecast to increase from 2022 to 2026, but at a slower pace than in the previous years. The U.S. is also home to the world’s most popular streaming platforms. Netflix, Disney+, and Amazon Prime Video have amassed hundreds of millions of users. However, although they are still the most popular SVOD services worldwide, Netflix and Disney+ in particular have struggled of late. They were losing a substantial number of subscribers in a few markets as the competition among both long-standing providers and newcomers, such as Paramount+, has intensified over the last few years.In the race for customers, own productions (originals) have long played a significant role in the SVOD market. Netflix for example won several Emmy Awards for its critically acclaimed TV show “House of Cards.” Additionally, the budget for original TV shows and movies skyrocketed in recent years, with Amazon’s “The Rings of Power” reaching a record 58.1 million U.S. dollars per episode. But in order to become and stay profitable, SVOD services need to save money and thus, forecasts project that video content spending will increase by only one percent from 2022 to 2023.
Cost is key
While streaming players cancel series after one or two seasons and remove content from their platforms to reduce costs, another factor has become more important for consumers. In light of a looming recession and with SVOD services increasing their subscription fees, customers can no longer afford several platforms at once. According to a survey from mid-2022, the major reasons for respondents to cancel video streaming subscriptions include high costs and subscribing to too many services. Streaming viewers opt for cheaper prices, even if that means watching ads. While platforms like Max, Discovery+, and Paramount+ have already provided so-called hybrid streaming for a long time, Disney+ and Netflix were the most recent SVOD services adding lower-cost ad-supported tiers to their offers. This new strategy designed to offset churn and revenues seems to be paying off. In January 2023, for example, nearly one in five sign-ups to Netflix went to its “Basic with ads” tier, and forecasts suggest that the global number of ad-supported Netflix subscribers will continue to increase.
