Stephanie Prange

June 6, 2018

Are there too many SVOD services?

Following a record year of 34 notable streaming launches in 2015, 2017 saw the debut of only 10 such services. And in a new study from L.E.K. Consulting, four out of every five consumers reported having just the right amount of video subscriptions.

“Despite the prevalence of cord cutters, subscription streaming services are now the ones that will need to adapt to survive,” stated Alex Evans, managing director in L.E.K.’s media and entertainment practice and co-author of “OTT in Transition: Finding Success in Subscription Video.”

“While the big players, like Netflix, are already winning, we expect genre-based services that successfully cater to niche tastes will also have a role to play,” he said in a statement. “Niche services will need to continuously update high-quality content, while ensuring their programming will resonate with their fickle audience. And larger video streaming platforms must keep an eye on what both traditional TV and emerging players are doing so they themselves don’t get disrupted by innovative content and pricing options.”

Among the dynamics subscription streaming video content providers will need to navigate, according to the L.E.K. report, are:

• OTT consumers expect more for less — just like music fans who left pricey CDs behind for cheap streaming audio services — and are unlikely to add features that are not truly unique.
• Targeted content and budget pricing do not guarantee success, as noted by the suspension of NBC’s $3.99 per month SeeSo comedy streaming service after less than two years.
• Consumers are at the point where aggregators of these services (platforms that centralize a number of streaming subscriptions into one account) are of immense appeal, similar to why and how cable bundles came about. Millennials alone were found to simultaneously carry at least six different services each, with their preferred model of consumption being aggregator services.

More than 3 million U.S. consumers left pay TV behind in 2017 — a threefold increase in the past two years — dropping cable subscribership to less than 80% of households for the first time in 15 years, according to industry research cited by L.E.K. But the L.E.K. study points out these cord cutters are not actually consuming less video content. In fact, by 2020, the “big three” subscription providers (Netflix, Hulu and Amazon Prime Video) are expected to approach a combined 200 million U.S. subscriptions.

“What we’re seeing is a continued, steady movement away from traditional TV consumption, largely driven by millennials,” Evans said in a statement. “We found through our research that the primary factor behind this is cost. Pay TV packages can easily cost $75 to $100 per month, whereas a monthly web-based streaming plan might be $10. It’s worth noting, though, that overall savings may not be as much as planned, considering most consumers will lose their bundle discount on broadband when dropping cable. That, plus aggregating multiple streaming services together, can really start to add up.”