The looming attention recession and the impact on D2C video — Mulligan

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2020 was a big year for OTT both because of well-backed D2C service launches alongside the fortuitous 12% increase in available entertainment time for digital services resulting from home-based working and the cessation of ‘in real life’ (IRL) entertainment alternatives. (Getty/FS-Stock)
Tim Mulligan

The last 16 months have been very good to the OTT space. Streaming initiatives have been launched by tech disruptors, media power houses and pay TV incumbents alike, all with the common objective of securing the next generation of video consumer engagement.

While the disruptive twin impacts of Netflix and YouTube have been steadily eroding the appeal of traditional cable and satellite contract-based services to younger demographics, it took the D2C big bang moment of Q4 2019 to Q3 2020 to mainstream the streaming proposition for the American consumer.

The rapid roll out of the D2C big four (Apple TV+, Disney+, HBO Max and Peacock) over a nine-month period has transformed the perception of streaming for the digital laggards who make up the core subscriber base of the pay TV operators. While the virtual MPVD initiatives of DISH and AT&T failed to fully offer a justified use case for switching to streaming for the 45 and older age group who make up 61% of U.S. pay TV subscribers (see this MIDiA Research Q4 2020 Consumer Survey), the D2C disruptors for 2019/20 have palpably succeeded. The D2C big four have grown from nothing at the start of November 2019 to 101.3 million active subscriptions at the end of 2020. This growth has been driven by a fortuitous combination of employing heavy marketing of established mainstream brands, alongside an extensive use of telco bundling deals leveraging pre-existing subscriber bases.

The first D2C battle for consumer engagement has been won and the second battle for retention is now beginning

As all good entertainment businesses know well, only half the battle is getting the consumer to engage with your new service. The bigger challenge, which makes or breaks a D2C proposition, is retention. Failure to hold audience engagement inevitably leads to accelerated churn. D2C is particularly prone to this due to the contract-free nature of its subscription model and the phenomenon of savvy-switching, where streaming subscribers strategically subscribe and unsubscribe to services based upon the exclusive zeitgeisty content on offer.

While older digital laggards are less predisposed to savvy switching than younger more lean-in digital natives, once they have broken the habit of the traditional pay TV contract, they are more likely to adopt this behavior following their current fixation on binge-viewing. Both are the inevitable behavioral consequences of freeing the video consumer from the constraints of traditional pay TV.

As savvy-switching starts to raise its head, a second and equally powerful challenge looms for retaining the recently won D2C big four subscriber base: the looming attention recession.

2020 was a big year for OTT both because of well-backed D2C service launches alongside the fortuitous 12% increase in available entertainment time for digital services resulting from home-based working and the cessation of ‘in real life’ (IRL) entertainment alternatives. However, prior to the outbreak of the COVID-19 pandemic, the digital economy had already reached peak attention, meaning that there was no longer any untapped free time available for D2C services to utilize. This meant that D2C engagement growth could only come at the expense of taking away engagement from competing digital services. The COVID bounce temporarily reversed this market dynamic, but as the vaccination program accelerates, and IRL sees an engagement surge due to suppressed lockdown demand, an impending attention recession now looms. The transition to post-peak digital attention is therefore likely to be heightened by the return to a post-pandemic ‘normality’.

How well the D2C big four manage this transition will be crucial to their long-term viability as streaming pay TV successors.

Tim Mulligan is the research director and lead video analyst at MIDiA Research – the entertainment intelligence and consulting firm. MIDiA works with businesses in the space, from TV broadcasters and production companies to streaming services, tech companies and financial organizations. Tim’s research encompasses the entire online video economy, with a key focus on how streaming is transforming the video consumption landscape. Prior to joining MIDiA Research, Tim ran a number of technology starts-ups focused on the TV and film industries.MIDiA Follow MIDiA on Twitter and LinkedIn

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by Fierce Video staff. They do not represent the opinions of Fierce Video.