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The 2020s were destined to be the era of maturation for streaming video, due to the mega media conglomerates jumping into the fray. COVID-19, which upended many other industries, is accelerating the underlying factors driving the growth of streaming video. Compressed binge streaming, content production stoppages and increased competition are colliding in a manner that is likely to result in a faster natural selection of winners and losers over the next year or so. To that end, The NPD Group is tracking what drives increased viewer engagement as well as what contributes most to the insufferable reality of subscriber churn.
The right stuff: exclusive content and affordability
It’s hardly surprising that the most frequently used SVOD services are also the ones enjoying the greatest increase in viewer engagement. Netflix, Hulu, Disney+, CBS All Access and Amazon Prime Video are being embraced by more and more consumers. However, there is not just one path to success, and the reason behind a viewer’s sign-up and increased engagement can differ vastly.
Take Disney+, for example, which has experienced the greatest increase in engagement with 57% of its subscribers saying they are using the service more often. Four dynamics are driving this: the right movies being available, exclusive offerings, affordability and the lack of ads. In contrast, increased engagement with CBS All Access is driven by interest in its TV shows. While also seen as affordable by those using it more, free trial is the number two engagement driver for this service. But there is a dichotomy: while CBS All Access scores among the top five services, it also has the highest rate of decreased usage. Indeed, the service has a mixed base where cancellation and decreased use is driven by trial subscriptions as the TV shows viewers are watching come to an end. This underscores the primary challenge of direct-to-consumer subscription offerings: delivering a robust, exclusive content array that keeps the viewer engaged.
The common thread among all the top services is quite straightforward: viewers increase engagement because the movies or TV shows they want are available, and that drives a perception of value.
Curse of the free trial
Promotions and discounts are a tried-and-true component of customer acquisition and as such, have been adopted to add more streaming video subscribers. Approaches range from the most basic 7-day free trial to more intricate and longer-term bundles such as Verizon’s ‘Disney+ on us’ for a year. Regardless, the trial must demonstrate value or subscribers will cancel. The only factor that facilitates greater churn than a free trial ending is simply not watching as much programming as before. While Disney’s U.S. subscriber base was propped up by the Verizon promotion, high user engagement and interest in the exclusive programming shows a strong foundation for Disney to retain those subscribers. Numerous other video services have a high proportion of subscribers on free or promotional trials with Apple TV+ topping the list. For these distributors, it becomes of tantamount importance to avoid the key attributes that drive reduced engagement and churn. They must ensure the presence of exclusive content that exceeds the expectations of what is available on other services or that which may be seen as more affordable.
This challenge is being exacerbated by the success video distributors have experienced during the COVID-19 stay-at-home orders. As of April 2020, more than half (55%) of SVOD subscribers cited using these services more now as a direct result of the pandemic. Concurrently, production has halted, which means that increased consumption and competition on the heels of hyper-compressed binge viewing will inevitably create a gap in content availability. As content is the primary driver of increased engagement and stemming churn risk, services that cannot procure fresh, appealing new programming will inevitably run the risk of losing their subscribers.
The prowess of free
Leading into the pandemic, there was a surge in viewers using free streaming services such as Pluto TV or Xumo, and these have become a staple of American’s TV viewing time. Indeed, we see the average streaming video customer uses nearly six AVOD and SVOD services. The free ad-supported services do not (yet) encompass the lion’s share of viewer engagement, but rather they fill a gap surrounding subscriptions akin to that of basic cable channels. These services tend to not have exclusive programming, which is seen as critical to subscribers; and for this reason, weekly engagement levels are much lower than those of subscription services. Despite that, churn risk is lower than the norm and most viewers do not cite programming as the key driver for free streaming service usage. Instead, features such as the ability to streaming on a TV-connected device and easy-to-use search and discovery features drive continued use of the services. This underscores the opportunity that lies ahead for integrated AVOD-SVOD services, and it also shows the potential threat free services can pose to subscription services if content offerings grow to look more like traditional cable programming.
While COVID-19 has accelerated the proliferation of streaming video, the fundamentals remain the same, in fact they have been accentuated. Content remains king and must deliver value.
Interested in more data on this subject, as well as more research and consumer insights on the broader streaming television industry? Please register for our virtual StreamTV Summer Research Summit on 6/29-6/30 here, where a collection of top industry analysts will be releasing a treasure trove of exclusive data and forecasts across a wide variety of leading trends in OTT. It's a one of a kind event you won't want to miss. We hope to see you there.
John Buffone is an executive director and industry analyst for The NPD Group’s Connected Intelligence practice. With more than 20 years of experience in the consumer research and entertainment industries, John has advised many of the largest media and consumer technology brands in the industry.
He offers his industry expertise on trends that focus on how connected devices are rapidly changing the way consumers use technology at home and on the go. As such, his research focuses on the confluence of digital content distribution and consumer electronics trends. As an industry analyst, he is regularly quoted in the press.
Prior to joining NPD’s Connected Intelligence team in 2012, John held positions as director of product and client development for NPD’s Entertainment practice. In these roles John led NPD’s home video client service team that supported the evolving digital market intelligence needs of the major movie studios and video retailers. He developed NPD’s Blu-ray Disc research portfolio, Digital Video tracking service, as well as the Home Automation and Digital Distribution Advisory services.
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceVideo staff. They do not represent the opinions of FierceVideo.