November 22, 2021
Kathryn O’Shea has a problem. The Greenville, S.C., retiree is a recent cord-cutter, transitioning from pay-TV to streaming video consumption. O’Shea, like millions of others who have ditched their cable, satellite or telecom bundles for subscription video-on-demand (SVOD), now faces an avalanche of subscription options — for which the collective price tag, compounded by soaring high-speed internet costs, rivals her former cable bill.
“I don’t even watch that much TV,” she says. “I’m not sure which service to use.”
In addition to Netflix, Hulu and Amazon Prime Video (O’Shea subscribes to Amazon for shipping), she was talked into signing up for free trials of HBO Max, Paramount+, Peacock and Disney+.
“I liked Wonder Woman and that Denzel Washington movie [The Little Things],” she says. “Disney stuff is usually good.”
Following 2020 launches of Max and Peacock, and Paramount+ and Discovery+ this year, consumer options for SVOD, in addition to a growing market of ad-supported VOD (AVOD) and free ad-supported TV (FAST) services, have skyrocketed. Throw in a pandemic, and 36% of American consumers now stream more now than they did before COVID-19 hit the national consciousness, according to data from Future Today.
“It’s like another virus,” O’Shea says with a laugh.
It’s a Streaming World
With myriad platforms available, there has never been a better time to be a consumer of digital movies and episodic programming, thanks to the proliferation of high-quality films and series, many of them produced expressly for the streamers.
But with studios, media companies and third-party apps offering endless programming across multiple platforms, distribution chaos and service
fatigue are part of the new content bundle.
“There’s not enough time in our lifetime to watch everything that’s available to stream,” Netflix’s Ted Sarandos told an investor group a few years ago. The co-CEO/chief content officer should know. He’s overseeing a $13.6 billion budget this year on original Netflix movies and TV shows. And that record-high budget is prompting other platforms such as HBO Max, Disney+, Peacock and Amazon Prime Video to up the ante as well.
With booming content buffets available across multiple platforms — some marketing early access to theatrical movies and episodic programming — has the rush to supplant the pricey cable bundle just produced a mirror image featuring escalating high-speed internet costs and a-la-carte streaming fees?
A recent survey for tech company The Trade Desk suggests a trend of “subscription fatigue” among the survey’s 2,600 respondents. As the streaming market continues to disrupt linear TV and upend content distribution, consumer weariness about it all is real — and the industry is taking steps to combat it.
As the country continues to adjust to post-pandemic life, a Horowitz Research survey found that streaming now supplants pay-TV household penetration, and consumer time with OTT video is bridging the gap between the time people spend watching broadcast television. Nielsen reported that in May 35% of consumers spent their TV viewing time streaming content or playing video games. That’s up from 20% in 2020 and 14% in 2019.
At the same time, consumers’ streaming options require monthly payments ranging from $4.99 to $17.99. A TiVo study found that respondents between the ages of 18 and 30 use more than 11 different video streaming services monthly, while older respondents (50 and up) use at least three video services. The average consumer, according to the TiVo study, now spends $142.20 monthly on high-speed internet and SVOD — significantly more than the average $100 cable bill.
John Buffone, media analyst with The NPD Group, characterizes rising streaming costs as a rebranding of the traditional pay-TV bill.
“One of the things that we are looking at is the potential for re-bundling down the road,” Buffone said in a media statement. “To date, re-bundling largely benefits viewers by providing a single billing relationship, user interface, and discounts.”
And that’s what fatigues consumers such as O’Shea, who says remembering what platform a favorite show is streaming on — and when she can access it — is a challenge.
“It makes my head hurt,” she says.
It’s a Numbers Game
Between 2018 and 2021, SVOD subscriptions among pay-TV viewers increased from 50% to 74%, according to Horowitz, which cited the lack of live sports during the pandemic in 2020 as another driving force for cord-cutting. Indeed, more than 33% of pay-TV subs have cut the cord, up from 23% in 2020, according to the study.
With nearly 60% of respondents in the Trade Desk study suggesting they spend too much money on multiple OTT subscriptions, more than 66% say escalating fees are a source of frustration. The report suggests subscription fatigue can also be described as the burnout consumers feel when they are faced with increased choice for original content.
In India, for example, there are about 40 different streaming video platforms, including Disney + Hotstar, which launched last year. Indian consumers make up 33% of the Disney+ global subscriber base of 116 million through the most-recent fiscal period — driven in part by the platform’s exclusive streaming access to professional cricket. The study found that to satisfy a variety of content interests, the average Indian respondent subscribed to a minimum of three services.
Netflix, which has struggled to gain a foothold in world’s second most-populous country, now offers Indian streamers concurrent options: an inexpensive mobile phone plan with limited content in addition to normal tiered options.
“Growth in that country is a marathon,” Sarandos said on a recent fiscal call. “We’re in it for the long haul.”
Over half of the respondents in Deloitte’s 2021 Digital Media Survey said they are re-evaluating multiple streaming subscriptions, and 40% said they wished to terminate at least one subscription. The survey also showed a number of respondents ranking gaming and music streaming ahead of streaming video, as compared with the 2019 survey. Notably, SVOD fatigue coincides with a global slowdown in subscriber growth. Until the third quarter, Netflix achieved only 66% of its recent sub growth estimates, according to the report.
Adriana Waterston, SVP of insights and strategy at Horowitz, contends streamers are feeling overwhelmed, with 50% of survey respondents saying there are too many services, which the analyst contends ultimately results in less content from major media brands available on streaming giants such as Netflix.
The analyst says she believes streaming viewers are struggling to keep connected to their favorite content: 49% of TV content viewers say they find it hard to know what shows are on which streaming services, and 44% say they often have a hard time finding something to watch at all.
Waterston says that in the early days of streaming, media companies were concerned that their network brands no longer mattered in the new ecosystem — especially with so much content from so many networks consolidated under the Netflix umbrella. With the market shift toward separate standalone streaming platforms designed to compete with Netflix, media brands matter once again.
“We are at a very interesting, pivotal moment,” Waterston says.
In the pay-TV heyday, subscribers often paid for access to as many as 500 linear channels. Now, SVOD platforms are essentially doing the same thing, driven by offering consumers inexpensive monthly pricing to lure subscriptions. Research from Ampere Analysis found that most U.S. survey respondents consider themselves service “super stackers,” with 52% of households now having access to three or more SVOD subscriptions, up from 45% a year ago.
Social media also is driving multiple SVOD subscriptions. TV is a bigger part of the conversation on social media platforms in the United States than in other countries, according to Ampere. Higher levels of competition among domestic streamers have translated into consumers now spending less time watching content on each of the services they have access to, according to the research firm.
“There are some big differences in the way people consume TV,” says senior analyst Annabel Yeomans. “In the U.S., TV is a much more important part of daily life and plays a greater role in social interaction than in other countries.
“In the last six months, we have seen that this not only impacts stacking rates, but also the growing demand for quality original content as streamers battle to engage subscribers and reach new audiences.”
As the SVOD market grows, market share for perennial leader Netflix is declining. In the second quarter of this year (ended June 30), Prime Video saw its market share increase 3% from the previous-year period according to JustWatch, an international streaming guide that tracks more than 20 million users per month across 54 countries. Observers contend Amazon added a greater number of new subs compared to the competition this year due to e-commerce’s importance during the pandemic.
Amazon saw a 16% increase in online sales to $53.1 billion in Q2. While Prime gained memberships, the average member also increased their SVOD subscriptions from 2.6 to 2.8 — considerably less than the national average of 3.8 streaming services. Ampere suggests this means there is less streaming competition for Prime members and indicates that they are getting what they need from fewer services.
Netflix topped 214 million subscribers worldwide through Sept. 30, exceeding the company’s — and industry — estimates. Amazon Prime Video boasts 150 million members, while Disney+ is projected to exceed Netflix’s sub count with 284 million subs by 2026, according to Digital TV Research.
The news is a rebound of sorts for Netflix, following a disappointing second quarter in subscriber gains, as the market adds competitors and consumer service stacking possibly undermining the SVOD pioneer’s prowess. While the streamer’s market share dwarfs the competition, ongoing platform saturation could result in Netflix subs trading for a newer model. The most common stacks also include Prime Video and Hulu.
Netflix should be cautious of the situation, say analysts, for as the cost of stacking services adds up, saving money is cited among Netflix subs as a driver for dropping the service, according to Ampere.
Michael Pachter, media analyst with Wedbush Securities in Los Angeles, says he uses the Roku search engine to find content and save time leapfrogging between platforms. Pachter says he still spends as much on streaming as on his pay-TV bill. The longtime Netflix bear believes that if the streamer keeps getting valuations of $1,500 per subscriber by investors, content owners are going to chase the streaming business model.
“I don’t see an end to the proliferation of services, and expect that their existence will continue to erode content available on conventional broadcast, lowering the appeal of cable and driving even more people to cut the cord,” Pachter says. “It’s a vicious cycle, with no end in sight.”
As the cost of stacking multiple streaming subscriptions rises, an antidote is emerging. Ad-supported VOD and free-ad-supported streaming TV (FAST) platforms are gaining viewers who are perfectly willing to sit through ads in return for free content. Free AVOD/FAST platforms include Facebook Watch, Redbox TV, The Roku Channel, Tubi, Pluto TV, Crackle and IMDb TV, among others.
For Lachlan Murdoch, CEO of Fox Corp., ad-supported free streaming distribution is the salve that heals all streaming wounds. Instead of spending billions on original content and attempting to pry a few dollars more a month from consumers, Murdoch eyes migrating original and branded Fox content to the media company’s Tubi platform — free to any viewer.
“We don’t want to compete in the subscription video-on-demand world,” Murdoch told an investor group in March. “We believe we can win in the advertising video-on-demand world … in a much more careful and clever way.”
Data from Hub’s annual “Monetization of Video” study suggests that tiered platforms — where viewers can choose between a paid ad-free option or a less-expensive (or free) ad-supported option — appeal to the largest cross-section of viewers.
In the June 2021 survey of 1,607 U.S. TV viewers ages 16 to 74, respondents were split into two groups. Each group was asked to choose from three hypothetical streaming services with identical content. Group one chose from a paid ad-free subscription, a free-with-ads service, and a paid limited-ads subscription (“fewer ads than you’d see on regular live-TV”). Group two chose from the same options, except the limited-ads service was replaced with a paid service offering two tiers to choose from: ad-free and ad-supported. Almost twice as many consumers chose the service with tiered options (36%) as the service with a limited-ad option only (19%).
The limited ads-only service got a much lower share than either the paid ad-free service or the free-with-ads service. On the other hand, the proportion choosing the tiered service was just as high as the proportion choosing free-with-ads, and higher than the proportion choosing the service with only a single ad-free option.
“It’s true that some TV viewers will do almost anything, including paying a premium, to avoid ads. But there are many who will choose ad-supported TV if it saves money or lets them watch programming, they can’t watch somewhere else,” says Jon Giegengack, one of the study’s authors.
In a separate Future Today report, 50.6% of respondents said they opted for AVOD to end paying for SVOD.
“Despite some pundits’ expectations, we’re seeing AVOD adoption flourish,” Vikrant Mathur, CEO of Future Today, said in a statement. “Our research solidifies that with the right viewing experience, the ad-supported streaming model is ideal for content owners, brands and, most importantly,
In the Hub survey, in a question asked before this summer’s launch of the ad-supported HBO Max option, 40% of Max subscribers said they’d consider switching to an AVOD option. But more than a quarter of those who didn’t subscribe to Max said they’d also consider signing up.
A TiVo report contends 58% of AVOD users don’t mind ads or commercials when watching TV. Another 81% said they would rather use free ad-supported streaming than subscribe to another paid service, while 83% said they wished Netflix or Prime Video offered a free ad-supported option.
“Tiered plans give viewers control of their experience. Whether they watch with ads or not, everyone is getting an experience they chose, and not one chosen for them,” Giegengack says.
The Empire Strikes Back
As scuttlebutt about the number and cost of SVOD platforms grows, media companies are fighting back.
Hulu, HBO Max and NBCUniversal’s Peacock are pursuing less-expensive AVOD options, with Paramount+ eyeing an ad-supported option as well. Last November, Netflix France began testing “Direct,” an option enabling users to simply log onto their account and begin streaming pre-selected content — no searching required.
“In France, where traditional TV consumption is very popular, many viewers like the idea of programming that avoids having to choose what they will watch,” Emily Grewal, product manager at Netflix, wrote in a blog post.
With 75% of U.S. households accessing streaming services, the market may be saturated. FAST platforms only require a few clicks to be entertained. To some observers, it’s a throwback of sorts to the broadcast era when viewers turned on the TV with little worry about cost or content.
“In many ways, what’s old is new again,” says Howard Horowitz, president of Horowitz Research. “The managed-services approach of the pay-TV ecosystem, with the ability to search and discover content across all networks in their package, helped consumers mitigate the chaos of a multichannel ecosystem. In the streaming environment, consumers are increasingly demanding universal search features to help them navigate across all their streaming apps for the same reason.”