Streaming Services Compete In A Crowded Subscription Race

Subscription Streaming

Remember the old joke about how cable offered the opportunity to have over 200 hundred channels of nothing to watch? As of today, that joke seems to apply to the world of video-on-demand (VOD) streaming.

Okay, so maybe there aren’t 200 separate streaming outlets out there just yet, but the number is surely climbing. There’s Netflix, Prime Video, Disney+, Peacock, Hulu, HBOMax, AppleTV+, Crackle, YouTube+, BritBox, AMC+, Paramount+ (the service formerly known as CBS All Access) — the list goes on and on, and is still growing. There is, it seems, a streaming service for every taste and every mood.

Some are niche, and are looking to attract a subset of specific genre lovers, like documentary fans or scary movie fanatics. Some are bigger, broader and more general — looking to disrupt the cable companies and movie studios of yesteryear by churning out complete lineups of programming, including reality shows, celebrity-studded popcorn movies and Oscar-bait productions like Netflix, Disney+ and Amazon.

And while 2020 was no doubt a very good year for streaming, with captive audiences stuck at home looking for something to watch, the question that surfaces now — as vaccines are circulating and consumers again have the option to go out and do something other than watch TV on the couch — is which of these subscriptions services will actually stick around.

Because it seems likely that not all of them are going to make it. A quick glance at the dozen or so listed above shows that consumers are paying by the month for these services, usually between $8-$12. And while subscribing to two or three doesn’t feel like much of a financial burden to most consumers, when it gets up to 10 or more services, the monthly cost can easily shoot past $100, causing consumers to become more selective in their viewing habits.

In fact, the year 2020 coughed up one of VOD streaming’s highest-profile belly-flops in the form of the service Quibi. From the outset, Quibi looked like it had everything it needed to make a solid run at the market that Netflix built: a seasoned leader in the form of media mogul Jeffrey Katzenberg, nearly $2 billion in investment and a low starting price of $4.95 a month. The service also promoted viewers’ ability to watch five- and 10-second snippets of shows on their phones.

But despite all of those selling points, Quibi declared it was bankrupt after only six months, unable to gain the traction it needed to compete against Netflix and other more established players in the digital media space.

And picking up traction in the field is no easy work, given how fiercely competitive and fundamentally hard to evaluate it is.  Netflix, for example, is a pure-play VOD company that entered the year in a strong position. When it announced its Q4 earnings in late January, Netflix told the world it had topped over 200 million paid memberships, with 8.5 million paid net additions to the platform during the fourth quarter alone. The company also said that average paid streaming memberships climbed 23 percent year over year in Q4, although the average revenue per membership was flat. It anticipates paid net adds of six million for Q1 2021 compared to 15.8 million in Q1 2020, which included the effect of the first pandemic lockdowns.

And though the firm acknowledged how crowded the space has become, 2020 was Netflix’s largest year of paid membership expansion in its existence, with 37 million paid memberships for the full year.

“Our strategy is simple: If we can continue to improve Netflix every day to better delight our members, we can be their first choice for streaming entertainment,” the company said in a letter to shareholders. “This past year is a testament to this approach.”

Likewise, Disney’s entrant into the streaming wars, Disney+, is another pure-play streaming service that entered 2021 following a massive 2020. As of last week, Disney reported over 100 million paid subscribers on the platform less than two years into its existence. And in light of the pandemic period, Disney has doubled down on its streaming offering and content. In October, the company started restructuring its media and entertainment divisions to focus more on streaming, announcing plans for more than 100 shows heading to Disney, including dozens of Marvel and Star Wars shows and movies.

Other services, like Prime Video and Apple TV+, are harder to evaluate because they are pieces of larger ecosystems within their respective parent firms. In Amazon’s case, that is the Prime membership bundle, which also includes things like free one-day shipping and access to special goods and services, like grocery delivery, discounts and Whole Foods. Apple TV+, on the other hand, is part of the Apple One bundle, mashed up with things like Apple’s Music, Fitness and News services. The evaluation isn’t as directly tied into user signups and membership numbers so much as how the VOD offering supports the wider ecosystem and keeps more consumers loyally wired in.

Amazon, of late, has expressed an interest in using its VOD content selectively to push its T-Commerce ambitions, allowing users to directly purchase the goods they see on the screen. Amazon Studios Chief Operating Officer Albert Cheng noted in a panel discussion that Amazon has long sought to “leverage the reach of Prime Video and marry that with commerce.” The goal, over time, is to connect the Amazon Video ecosystem to the Amazon commerce ecosystem, mediated by its growing lineup of devices and delivered by its expanding voice ecosystem.

And when it comes to signing up for subscriptions, according to PYMNTS data, consumers are focused less on individual options and more on opportunities to bundle those services — particularly if they can choose what’s in the bundle. The motivation for that is cost savings, as 51 percent of consumers ranked saving money among the top three reasons for considering buying subscription bundles, and nearly one-third of consumers gave it the top spot.

Convenience is also important, as consumers reported that managing access to multiple accounts can be daunting. Some 43 percent chose “the convenience of being able to access services through a single account and login” as one of the most important factors. And the more subscriptions they are managing, the more valuable bundles start to look: Among consumers who already subscribe to a greater number of services, the share who prefer bundles is as high as 79 percent. Interest is also high among those with three to five subscription plans (72 percent) and those who have two or fewer (61 percent).

Subscription streaming services aren’t going away. But as the competition for consumers’ free time is about to heat up along with the weather, the competition to keep subscribers will also intensify. Consumers want bundles, which means some consolidation could be in the sector’s future.

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