The SVoD market is primed with a series of major D2C platform launches pressurising an already heated landscape. Among them, arriving in November, are Apple TV+ and Disney+. They will be joined in early 2020 by HBO Max from AT&T and the international rollout for Comcast’s NOW TV.
They broadly conclude that traditional media distribution is broken but that there is headroom in subscription on-demand, and that exclusive ‘marquee’ content is essential to a winning formula.
That Netflix is a principal target is revealed in both the pricing intended to undercut the dominant global player (in the US, Disney+ will cost $6.99, half the price of a standard Netflix monthly subscription) and in the repatriation of content from the service (Disney severed deals to distribute the Marvel Universe on Netflix; TimeWarner spent $400m buying back Friends).
While TV viewing remains dominant in Europe, revenue has been broadly flat over the past five years and national networks have seen their audiences erode, states Digital TV Research. Meanwhile, SVoD figures are forecast by the analyst to reach 131.20 million in Western Europe by 2024, doubling from 65.19 million by end-2018, with total SVoD revenue in the region to jump to $12.47 billion by 2023 up from $4.44 billion in 2017.
However, the multi-billion -dollar investments being made in D2C strategies (Apple plans $5bn on content between now and 2022, dwarfed by the $8bn-$9bn that Netflix is spending annually) could backfire for a number of reasons.
As the overall size of the SVoD pie rises the share of every player will drop as new entrants compete for the household budget.
While consumers are, on average, willing to pay for three SVoD packages per household, the proliferation of D2C services will impact consumer choice and what they can afford. Cleeng estimates that, in the US, households have an average budget of just $16 a month for OTT subs.
Furthermore, the three payTV/studio giants (AT&T/TimeWarner; Disney/Fox; Comcast NBCU) will all experience reversals as service cannibalisation affects their ability to build streaming revenues, suggests researcher Rethink TV. Netflix market share may dilute (from 63% 2018 to 52% by 2024) but it cannot be shifted from number one.
While there is scope for further SVoD stacking there is concern that fragmented content choice will escalate consumer frustration. A Hub Entertainment Research survey of US consumers found consumers hungry for consolidation: looking for fewer platforms—even a single platform—that will deliver their full array of content in one place. Consumers long for simplicity when it comes to choosing and managing their entertainment choices.
That leaves the field open for a pay TV operator or OTT service like Amazon to aggregate multiple accounts and to deliver an array of targeted content and services like contextuality, second screen and voice control in a single user experience that users can access without leaving their main TV screen.
New services may entice consumers with free trials and aggressive introductory prices but the long-term success of D2C will depend more on customer retention than acquisition and that requires a strategic mix of technology, marketing and the right content to satisfy the consumer experience.
