Q&A: Streaming Media Expert Dan Rayburn on the Future of SVOD and the Rise of AVOD

Dan Rayburn is a veteran streaming media expert who chairs the Streaming Summit at the annual NAB Show. He has produced over 50 in-person conferences for the industry. Rayburn is considered one of the leading authorities, speakers, and writers on streaming media technology, content, and business models. An avid blogger (www.streamingmediablog.com), author and analyst, Rayburn has been quoted more than 2,000 times by the media, with regular TV appearances on CNBC, TD Ameritrade Network, Bloomberg TV and NPR, among others. He has also received invitations to speak as a witness at hearings by both the U.S. Senate and U.S. House of Representatives on topics pertaining to net neutrality, telecom mergers and content delivery architectures. He spent 15 years as a principal analyst at research and consulting firm Frost & Sullivan, where he published market data and analysis on the industry.

Media Play News asked Rayburn to share his thoughts on the streaming business at a time when cracks are beginning to appear, with Netflix losing subscribers and analysts talking about streaming fatigue amid the high cost of multiple subs.

MPN: What do you see happening in the subscription streaming space over the next 12 months? Will there be consolidation? Is any service “bulletproof?”

Rayburn: Consumers have a lot of choice in the market when it comes to video entertainment services, both subscription-based, advertising-based and a hybrid combination of the two. While content variety is a good thing, it also adds complexity, since most consumers can’t sign up for just one or two services to get all the video content they want each month. Nearly all streaming services continue to raise prices each year, due to their ever-expanding content creation and acquisition costs, which are expected to continue to grow. This is driving up pricing and creating a dilemma for consumers who have a limited budget and can’t sign up for every streaming service in the market.

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The biggest change we will see over the next 12 months is Disney and Netflix adding new ad-supported tiers to their offerings, so they can lower subscription prices and “hopefully” make up for the difference in ad revenue. Disney will offer a new option that includes ads with Disney+ and Netflix will also have an option for ads in a new Netflix tier. Both services have always been ad free, but the two companies realize that with so much choice in the market and many consumers having to sign up to four to six different video services, some consumers want the option for a lower monthly price and are willing to sit though ads to be able to pay less. That said, this is not a business that has a one-size-fits-all model, and some consumers will still be willing to pay more each month for a package with no ads.

We’ve already had ad-supported streaming services in the market from Hulu, Peacock TV, HBO Max and others, so this is not new for the industry. But it is for Disney and Netflix. By my estimates, the companies could get $5 to $7 per user, per month, in U.S. advertising revenue soon after the rollout. Outside the U.S., the number would be lower, at $2 to $3 of ad revenue per user, per month. What the user experience will look like with ads, how many minutes of ads will be shown per hour and how the advertising plan will roll out globally is still unknown for both Disney and Netflix. It is expected that both will offer their new ad-supported plans by the end of 2022.

MPN: What can, and should, streaming services do to differentiate themselves and rise above the competition?

Rayburn: All streaming services are focusing on trying to create and license the best content, based on the user(s) they are targeting. From a technical standpoint, they are also working hard to make the services easier to use, be more reliable, and have better content discovery and personalization features — with the goal of keeping users engaged longer on their platforms. They also are working to make the apps load faster, be easier to navigate, include more metadata around the videos and provide better content recommendation options. Streaming services have been working on improving their video streaming technology stack since day one to improve video quality and the user experience, so none of these efforts are new. But they are crucial in helping to make their service stand out among all the others competitive services in the market. Content is important, but so is ease of use, reliability of the service and the ability to navigate and find the content you want.

MPN: If, as they say, content is king, then is the streamer that spends the most on original content going to win, or is there something else?

Rayburn: Content budgets matter, but it’s also what the service is getting in return for the money they are spending. Netflix, Hulu, Amazon, and the others all take chances on producing original content they think will do well. Sometimes, the content doesn’t give them the return they expected and, as a result, they don’t produce more episodes and cancel the series. It’s a difficult business to be in when you have to create a lot of different types of content for many different audiences. There is a lot of risk involved. While having a large content budget helps, since it gives you more volume of content to offer and market to consumers, it’s also the number one reason why services keep raising prices in the market — expanding content budgets. This cost also contributes to the profitability of the service and causes the company to have to work harder to please those on Wall Street. As an example, in Q1 of calendar year 2022, Disney’s D2C business lost $900 million, just in one quarter. The company expects Disney+ to become profitable sometime in fiscal 2024, and there are some who believe it might take even longer than that, if the rate of growth of Disney+ subscribers slows down, as we have seen with Netflix at the start of the year.

MPN: How accurate is audience measurement, given, for one, the abundance of free trial offers and, for another, Amazon mixing in free shipping with Prime Video?

Rayburn: The only companies that truly know what is going on with streaming services, in terms of viewership, popularity of content, engagement etc., are the streaming services themselves. Some companies, like Alphabet with YouTube TV, don’t even disclose high-level numbers of how many subscribers they have. No streaming media service gives out much in the way of data the industry can use to determine what’s really taking place on their platforms. This is why there are a lot of third-party services in the market that are all trying to measure engagement, churn and retention across many streaming services. These third-party firms struggle to provide detailed and accurate data in the market as their methodology, definitions and comparison of services all vary. Some do give a high-level overview of popular content and what’s trending, but none have a good detailed understanding of churn, retention, ad delivery, or how consumers start and stop video services. It’s also important to note that many streaming services define terms like users, paying subscriber, churn and retention using very different definitions.

MPN: What impact will AVOD have on subscription streaming? It has been said that consumers, since the birth of home video nearly half a century ago, have shown a willingness to pay more to not have to deal with commercials. And yet AVOD has shown remarkable growth over the last few years.

Rayburn: Consumers have different needs depending on content type (live/VOD), length of content (short-form/long-form), desired quality (HD/UHD), device it will be played back on (large screen/mobile), business model (AVOD/SVOD/hybrid) and what type of overall video “experience” they are looking for. Subscribers will pay for ads, and we have many examples of such services in the market including Pluto TV, Tubi, Roku Channel, Twitch, Peacock TV and Amazon’s Freevee. Warner Bros. Discovery, Disney and others have told the industry that their lower-priced tiers, with ads, are some of the most popular plans consumers sign up for. The entertainment business, including music and video, is not a one-size-fits-all model.

MPN: What can be done to elevate the consumer experience, and why is this important?

Rayburn: The best technology is not always what’s adopted. The right consumer experience is all about using the proper combination of technologies within the streaming video workflow to make the experience a great one. Things like ease of use, reliability of the apps and services, the quality of the video and the ability to easily find content and navigate through content, all have to work together. There is no silo in the streaming media ecosystem; you need them to all work together to provide the best experience possible.

 

New, Emerging Technologies Take Center Stage at NAB 2022

LAS VEGAS — Attendees at the National Association of Broadcasters (NAB) show this week can’t help but notice the differences between the big broadcast show, back after a two-year absence, and CES 2022 just three months earlier.

Masks were conspicuously absent, social distancing went out the window, and people were shaking hands with the enthusiasm and vigor of campaigning politicians.

We may not be in the clear from COVID-19 just yet, but you wouldn’t know it from the looks of the NAB show, which concludes its four-day run April 27.

Attendance estimates have already been revised upwards 10% to 55,000, and the evening party circuit is in full swing.

Curtis LeGeyt (NAB photo)

As new National Association of Broadcasters (NAB) President and CEO Curtis LeGeyt said April 25 in his first State of the Industry address: “Welcome to the 2022 NAB Show! Six words that I’ve waited three years to say!”

Officially, the show’s focus is on broadcast, entertainment and technology — but in truth it’s door No. 3. Just like CES, most of the excitement is being generated by new and emerging technologies, from production to monetization to distribution, mostly streaming.

LeGeyt even said as much, promising attendees, “This week will offer a reimagined and unforgettable experience as we explore the technologies that will power this industry for years to come.”

The new head of the NAB noted that “the next generation of technologies includes not only the revolutionary new broadcast standard — ATSC 3.0 — but also other content delivery methods — whether it’s 5G, streaming, or mobile video.”

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On the policy side, LeGeyt vowed support for the trade group’s legacy broadcast membership. He called for Congress to take action “to rein in the gatekeeping ability of the Big Tech giants who are stifling the economics of local news.” He urged lawmaker and regulators to “modernize media ownership laws to reflect the realities of the marketplace,” and called on the FCC “to reorient how it thinks about broadcast policy more broadly.” He also encouraged congressional support for the Local Radio Freedom Act, which opposes a new performance fee on local radio stations.

At the two-day Streaming Summit, which concludes April 26, conference chair Dan Rayburn shared industry outlooks and trends — and reiterated what he said in an interview on the NAB Amplify website earlier this year: that while the proliferation of streamers has left consumers feeling “overwhelmed” due to the escalating cost of subscription stacking, AVOD is providing them with a free or cheaper alternative, even if there’s a lack of premium content and newer movies and shows.

Earlier, on Sunday, PBS Chief Digital and Marketing Officer Ira Rubenstein and Wavetable founder Howard Gray discussed public television’s streaming strategy. Rubenstein said streaming is important, but “complicated” for PBS. During his eight years at PBS, he said, “I’ve been very focused on broadening the distribution of our local stations to digital, and you have to do that at scale. It’s just not practical for every one of our 300 stations to figure out on their own live streaming to Roku and other devices.”

As a result, he said, PBS has been working in partnership with companies such as YouTube and DirecTV Stream on “bringing our content to those live platforms.”

On the eve of the show,  Whip Media, an enterprise software platform and data provider, announced partnerships with Plint, Digit, Limecraft, and NexSpec for the Whip Media Exchange, the company’s global licensing and research platform for film and TV content. The four are the latest companies to join Whip Media’s global distribution services program, which includes existing partners Bitmax, Giant Interactive and OD Media. Through the program, Whip Media offers content buyers and sellers access to a network of partners to support content distribution and accelerate deal-making.

Whip Media and partners held a Sunday evening party at the Vdara. (L-R): Saj Jayasinghe, Whip Media’s SVP of global enterprise account management; James Crossland, SVP and head of global content operations at WarnerMedia; Jonathan Schiminske, VP of client relations and operations strategy at WarnerMedia; Carol Hanley, president of Whip Media; and Jerry Inman, chief marketing officer at Whip Media. (Media Play News staff photo)

Plint, a provider of dubbing, subtitling and cloud-based localization workflow management tools to the TV and movie industry, will provide smart localization services to Exchange clients as they license their content globally.

Digit, a progressive media supply chain business offering transcoding, monetization and delivery across VoD, OTT and broadcast, will provide global content distribution services.

NexSpec, which offers SaaS solutions for media and entertainment companies, will help Whip Media Exchange customers redefine inventory management and automate the media distribution supply chain.

And Limecraft, an online collaborative workspace for video production, will allow Exchange clients to take advantage of the latest in AI and machine learning to automate the grunt work and to speed up production and distribution processes, including subtitling and localization.

“As the amount of streaming content available has exploded and spread to more global markets, we’ve developed an ecosystem of leading partners that help facilitate the entire content licensing process as content distribution models rapidly evolve,” said Alisa Joseph, SVP of business development and strategy for Whip Media.

The NAB Show is put on by the National Association of Broadcasters, an advocacy association for America’s broadcasters. The NAB advances radio and television interests in legislative, regulatory and public affairs.