The future of streaming is… TV?
Streaming video is here to stay, but Netflix’s recent loss in subscribers indicates that companies will have to depend more on some of the revenue-generating methods that served the traditional TV business well for decades, such as advertising and bundling.
Subscribing to advertising
While overall growth in streaming continues to be robust, Netflix’s recent loss in subscribers indicates a turning point in the industry. The growing competition of both global and local players will make it increasingly hard for all players to grow. As a result, subscription services are resorting to the revenue model that has sustained the TV business for decades: advertising. HBO Max, Peacock, and Hulu already offer ad-based tiers – in some cases since inception – and now Netflix and Disney are reluctantly following their example. Naturally, advertisers are pleased, since they will finally be able to reach those previously inaccessible viewers. Competition in the overall streaming market, however, will only increase. In addition to YouTube, subscription services will have to face free ad-supported streaming television (FAST) such as Paramount’s Pluto, Comcast’s Xumo, Fox’s Tubi, and Amazon’s Freevee. Moreover, subscription services will have to ensure that their ad-based tiers will not cannibalize too many higher-tier customers, while also reaching enough people to attract quality advertisers. Walking this fine line will not be easy.
Broaden Your Horizons
- Tom Goodwin of The Drum argues that the real promise of Netflix as an ad platform is that it may finally challenge the industry to invent new forms of advertising instead of just using the same old from TV and online.
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- The New Yorker describes how Oslo’s use of climate budgeting provides a blue print for other cities who want to make a meaningful difference in the fight against climate change.
Back to the bundle
In addition to advertising, Netflix’s recent decline might be a catalyst for another TV industry mainstay: the bundle. Consumers are already becoming overwhelmed with the growing number of streaming options. In 2019, only 32% of US paid video subscribers paid for three or more services, today it is 58%. Recent streaming price hikes in combination with rising inflation, however, will have consumers look again at their subscriptions. A streaming bundle with an aggregated discount might be a reason to keep subscribing. Roku, Amazon, Apple and Google are already offering streaming aggregation services and/or devices that could create such bundles. The original distributors – cable companies such as Comcast or Charter – are also in a good position: selling bundles of video content has always been their business. Offering streaming bundles might even help them to stem the tide of cord cutting. Moreover, with their broadband offerings they already are present in people’s homes. Comcast and Charter are positioning for that opportunity with their newly launched joint venture that will push Comcast’s Flex streaming platform into more homes across America.
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