Economic circumstances put household finances and the entertainment industry to the test

Elizabeth Parks _ Parks Associates

Competition is intensifying in the streaming world as economic circumstances put a strain on household finances and the entertainment industry. This was made abundantly clear at the recent StreamTV Program Held in Westminster, Colorado, industry players gathered to discuss the state of the market, the latest business strategies for streaming video distribution, the impact on advertising, and challenges with profitability.

Service providers and platforms compete for dollars through subscriptions, advertising, premium content and bundles in the highly competitive entertainment sector. Over the past 10 years, the traditional cable TV bundle has declined and an increasing number of cable TV providers have determined that traditional cable TV does not provide sufficient profitability.

Meanwhile, streaming is the leading choice for video entertainment today, with 88% of U.S. Internet households now subscribing to at least one OTT service, according to Parks Associates’ most recent Video Services Dashboard, a consumer research study of 8,004 U.S. Internet household heads conducted between March 21, 2024, and April 4, 2024.

The traditional pay-TV subscription rate has fallen to 43%, representing 51.6 million Internet-accessible households. Many households, which previously had both streaming and traditional pay-TV, are now opting for one over the other. Due to rising costs of content and subscriptions, consumers are cutting back on their subscriptions and switching to more affordable ad-supported plans.

Parks Associates research shows that US households with 5 or more OTT subscriptions fell from 52% to 46% and that average monthly spending on OTT SVOD services decreased from $73 in Q3 2023 to $63 in Q1 2024.

In the days of cable TV, viewing was limited to linear programs interspersed with commercials, but the advent and proliferation of streaming has significantly transformed video viewing. Today, consumers have a wealth of options: some for a nominal fee, some for a substantial fee, some accompanied by ads, some ad-free, and some that are completely free and obtained through an antenna, over the air (OTA).

The use of AVOD and FAST Streaming services grew by up to 42% in the first quarter of 2024, confirming earlier predictions that more consumers will find these more cost-effective options attractive. This migration also benefits streaming providers, who earn more revenue from advertising than from subscription fees.

Consumers now have an unprecedented volume of video content options at their disposal, with a variety of streaming services, on-demand platforms and traditional broadcasters offering diverse and extensive libraries to suit all preferences and interests. According to research from Parks Associates, companies that own or aggregate television and video assets distribute their content across 18 platforms on average.

Consumers now have the ability to search for what content to watch and where and how to obtain it. This freedom inevitably affects how consumers choose their entertainment setup, especially in the face of external circumstances such as economic factors, industry changes, and/or technological advancements.

The wide variety of content options has made it a significant challenge for advertisers to get their products in front of viewers. This issue was a major topic of discussion at the StreamTV Show, where key industry players stressed the need to invest in additional solutions to unify a highly fragmented market and its associated data.

Fragmentation makes decision-making difficult

With numerous streaming services, on-demand platforms and traditional broadcasters competing for audience attention, advertisers are faced with the challenge of effectively targeting and reaching desired demographics. This fragmentation makes it difficult to achieve the same level of exposure that was once possible with fewer, more centralized channels.

Solution providers are everywhere in the streaming market, pushing the latest “AI” solution, but the most sophisticated vendors are focused on building a “full stack” of technology solutions.

A comprehensive software solution opens up many new opportunities for advanced applications and deeper data integration, enabling more meaningful insights into key metrics. Recent custom research from Parks Associates and SymphonyAI’s media division notes that 47% of streaming industry executives lack the data needed to make good business decisions. Even when that data is available, it’s often difficult or impossible to collect and compare it—71% of industry executives say it’s difficult to see all streaming-related data in one place.

Parks Associates Chart IV July 2024

Fragmented data sources create numerous and ongoing headaches for streaming executives when it comes to making informed decisions about their services and subscribers. For example, 78% of streaming executives in the study said that content performance by title is or would be “very useful,” but only 46% said the data is fully accessible to them.

By integrating all aspects of the streaming ecosystem—from content creation and management to distribution and monetization—these advanced software solutions provide a unified platform that consolidates data across multiple touchpoints. This integration enables streaming providers to collect and analyze a broad set of metrics, providing insights into viewer behavior, content performance, and advertising effectiveness.

For example, advanced analytics capabilities allow vendors to track detailed viewer engagement metrics such as viewing times, content preferences, and user interactions. By combining these insights with data from advertising campaigns and subscription trends, vendors can gain a comprehensive view of their audience’s habits and preferences. This approach supports more effective decision-making, helping vendors optimize content strategies, personalize viewer experiences, and refine advertising initiatives.

An end-to-end solution facilitates seamless integration with third-party tools and platforms, allowing for the creation of custom applications that enhance functionality. Providers can integrate with CRM systems for targeted marketing, employ machine learning algorithms for personalized recommendations, and utilize automated content management and distribution tools.

Furthermore, the financial dynamics of content distribution have evolved, leading to a shift from pure subscription models to hybrid and ad-supported video-on-demand (AVOD) models. As competition intensifies and consumer subscription fatigue sets in, platforms are increasingly adopting hybrid approaches that combine subscription fees with advertising revenue. AVOD models, in particular, offer free or lower-cost access to content in exchange for viewers watching ads, providing an attractive alternative for budget-conscious consumers.

This shift requires a more strategic and data-driven approach from advertisers, who must now navigate a complex ecosystem to effectively position their products while balancing the need for targeted advertising and viewer engagement.

Achieving profitability will be a challenge for streaming service providers, and service fees are likely to continue to rise, along with new packages for consumers to choose from. Higher costs for these services may be necessary to reach a sustainable level of profitability, but consumers need to see the value of the increased costs. Consumers are exhausted by the inflation affecting virtually every aspect of daily life and are cutting back on spending accordingly. The current financial pressures on consumers only intensify competition among streaming providers and will spur further growth in free, ad-based services.

Elizabeth Parks is President and Chief Marketing Officer of Parks Associates. As President, Elizabeth supports all teams at Parks Associates, a woman- and family-owned market research and consulting firm. She oversees the firm’s research topics and coverage areas and directs Parks Associates’ integrated strategic communications plan, which includes advertising, public relations, and marketing. Elizabeth has supported the growth of Parks Associates’ marketing and business services for 23 years and is the key organizer of all projects. Parks Associates Eventsincluding Parks Associates’ signature CONNECTIONS™ event. It also drives the overall mission of providing clients with the best industry and consumer research and analysis on the consumer technology and SMB markets to inform strategic market decisions.

Elizabeth joined Parks Associates full-time after graduating from the University of Texas at Austin with a Bachelor of Arts in Psychology.

Industry Voices are opinion columns written by outside contributors (often industry experts or analysts) who are invited into the conversation by the StreamTV Insider staff. They do not represent the views of StreamTV Insider.

‘This article may contain information published by third parties, some details of this article were extracted from the following source: www.streamtvinsider.com’

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