Binge-watching took on a whole new meaning during the first year of the Covid-19 pandemic.
Whether it was Apple TV+’s Ted Lasso or Netflix’s Bridgerton, consumers’ hunger for entertainment in a locked-down world injected rocket fuel into an already exploding streaming video marketplace. Time spent watching streaming services has soared, and in July, streaming video accounted for 28% of viewers’ total television time, according to Nielsen. As of early 2021, nearly half of U.S. broadband households subscribe to at least four streaming services, according to research firm Parks Associates.
Which is why almost every streaming service has seen forecast-busting growth, including Disney+, which has “exceeded our wildest expectations,” as Disney CEO Bob Chapek said in late 2020, and Discovery+, which was “exceeding all [its] early benchmarks” in April, according to Discovery CEO David Zaslav.
Now, though, some of that fuel is running low. While the delta variant continues to threaten a full-scale Covid-19 recovery and consumers are still streaming plenty, there’s evidence that a not-insignificant number of them are prepared to scale back. Nearly a third of U.S. online adults say they are tired of watching so much TV and film, and about one-fifth plan on spending less time watching as pandemic restrictions ease, according to Forrester.
In other words, a streaming reckoning is coming.
“We do see consumers seeking to consolidate which services they choose to keep out of the stack of services that they have available to them at any given time,” says Paul Erickson, a senior analyst at Parks Associates. “There’s been a proliferation of choice as of late, and there’s only a finite number of hours and dollars that each household has committed toward watching streaming video.”
After having more than a year to test out new services, binge-watch their favorite series and exhaust the free trials available, some viewers are looking to slim down their subscription slate, a dynamic that threatens even the industry’s biggest streamers. Netflix lost around 430,000 subscribers in the U.S. and Canada in its most recent quarter, a rare setback for the streaming behemoth.
“Consumers are going to be rejiggering their subscriptions,” says Kelly Metz, Omnicom Media Group’s managing director, advanced TV. “They went on a binge, they subscribed, they installed, and now there’s a culling effect that seems to be happening behaviorally among the consumer base.”
The extent of that culling remains to be seen, primarily because the industry can’t agree on how many streaming services a post-pandemic consumer will be willing to pay for (estimates range from three to five), Erickson says. But the pressure is on for subscription services that are still trying to win over consumers while also delivering for their growing slate of advertising clients. They can’t afford to be among the services that don’t make the cut.
“You have to earn the right to serve customers day in and day out,” says Brad Wilson, evp, growth and revenue at WarnerMedia and streamer HBO Max.
Winning over the whole household
In a business where the costs of operations and content production are significant and constant, a streaming service’s worst enemy is churn. That explains why so many platforms, including HBO Max, Paramount+ and Peacock, are aggressively positioning themselves as all-purpose streamers—because winning over multiple family members is a great way to protect against subscriber drop-off.
“Let’s say dad is only interested in football. Getting mom and the kids involved and engaged in other content is really important,” says Tom Ryan, CEO of streaming at ViacomCBS, where he oversees Paramount+.
That’s why kids’ programming is proving particularly crucial for Paramount+’s first-year growth. A revival of Nickelodeon’s beloved teen sitcom iCarly was a leading acquisition driver in ViacomCBS’ most recent quarter, while kids’ franchises like SpongeBob SquarePants and Rugrats also drove engagement, Ryan says.
At Disney, the all-in-the-family approach is reflected in the company’s Disney Bundle, which combines kid-friendly Disney+ with the sports-centric ESPN+ and the all-purpose Hulu ad-supported tier. That combination, along with the bundle’s discounted price, has driven down subscriber churn.
“While we enjoy extremely low churn rates on our individual services, the churn rates on the bundle are even lower—surprisingly low, even for us,” Disney’s Chapek recently told investors.
Keeping the content flowing
Part of keeping all members of a household coming back to a service is keeping a mix of content flowing, and streamers are constantly adding to their selection of offerings, whether that means original programming, library content, live sports or movies.
Originals are a key acquisition driver on lifestyle streaming service Discovery+, which debuted more than 1,000 hours of original programming in its first year on the market. “The best antidote to churn is engagement,” says Pato Spagnoletto, Discovery’s global chief marketing officer, direct to consumer. “We are constantly debuting new content to keep subscribers engaged.” ADWEEK