2021 brought several welcome changes after a 2020 that was great for subscription streaming services but a challenge for much of the rest of the industry. Consumers continued to gorge on mountains of new original content as major market players doubled down on their streaming services with new content budgets and plans for much more in the future. As the year draws to a close, several industry trends are shaping the future of competition, consumption, and consumer experience across various parts of the video entertainment ecosystem. The net-net points to an increasingly dynamic market for video entertainment with intensifying competition that will last well beyond 2022.
Push of FAST and ad-supported OTT services
The acquisitions of Tubi, Pluto TV, Crackle, and XUMO in 2019 and 2020 were the first steps, and indicators that major players were putting serious thought, and money, behind free, ad-supported streaming services. This interest has blossomed in 2021 to provide a new depth of competition and more robust services in ad-supported OTT. FAST (free ad-supported TV) channels have been of particular interest – both from services offering free live channels and content rights holders seeking to create and distribute their own channels. The viewing mechanics and advertising of FAST channels are familiar to all viewers, regardless of generation.
Ad buying is also more familiar to advertisers that want to purchase inventory tied to specific content brands. Importantly, no single ad-supported streaming service has captured over one-third of streaming viewers, and most stream to less than 15% of consumers overall. Even among viewers of services with FAST channels, no service captures over half of FAST viewers. Thus, competition will continue to be tight in this space, with opportunity remaining for players to take a dominant competitive position.
Across the industry, concerns voiced about subscription fatigue are becoming louder. With multiple major players – Netflix, Amazon, Disney, WarnerMedia, Apple, ViacomCBS and others – claiming massive global subscriber goals, many executives are concerned by potential plateaus in their US subscriber numbers. Their concerns are warranted. US consumers packed on multiple OTT service subscriptions during the pandemic. Today, over 55% of US consumers subscribe to 3 or more OTT video services, leaving many to question how many players can build and sustain a large OTT subscriber base. To help continue subscriber growth, several OTT subscription services are launching new bundling promotions. Black Friday and Cyber Monday deals were available for many services, including Hulu, AMC Plus, Philo, Showtime, Starz, and several others.
Beyond these, Disney recently launched a new bundle of Disney+, ESPN+ and Hulu (with limited commercials), hoping to use fans of each service to drive incremental sales for the others. MasterClass, a streaming service based on video classes by leading talent and celebrities in multiple fields, is offering a 2 for 1 special, with buyers able to purchase one subscription for themselves and one to give away. As we look to 2022, promotions and marketing will become more important as competition (and churn) intensifies in the subscription space.
New streaming device wars
The battle for primacy in TV streaming devices has taken a new turn. Communication providers are launching or playing a major software role in streaming consumer electronic devices. Comcast recently launched their XiOne streaming box in Germany and Italy and announced their move into smart TVs via their XClass product. Subsidiary Sky introduced its Sky Glass smart TV offering earlier this year as well. Verizon unveiled its own streaming device, Verizon Stream TV Soundbar, in cooperation with Bang & Olufsen in December. Not only does this represent a new element of competition for Roku, Apple, Amazon, Samsung, LG, and others, it also stands as a major shift for an industry sector that at one time bemoaned the necessity of stocking (and maintaining) pay-TV set-top boxes in their subscribers’ homes. So, why would pay-TV providers be interested in a thin-margin business like TVs and streaming boxes?
Priority access is the answer. Comcast, Verizon, and others see that the device UX can control, or at least bias, which content services consumers are exposed to. These devices also serve as the key data collection point, allowing them to get a better, holistic look into consumers’ often shifting media consumption patterns. These service providers can leverage sales of content or communication offerings to overcome often low CE margins. However, whether they can compete with the innovation and scale of global CE companies is another matter. Interpret