As the cost of living rose, nearly half a million households took out value-driven subscriptions. Alex Spurzem, general manager at Samsung Ads ANZ, explains why subscription video-on-demand (SVOD) services are balancing scale, content and cost.
The streaming world is shifting once again. The explosive growth of SVOD services, particularly over the past two years, is slowing. Netflix and Disney+ have used their ad-free offerings to sway and sign up audiences in huge numbers and become market leaders. However, ongoing economic uncertainty in Australia is now putting pressure on their stronghold, as market pressures are seeing more offer an ad-funded tier.
At the end of last month Netflix Co-CEO Ted Sarandos said that he’s following the quickest growing viewing experience right now, as Free Ad-Supported TV channels are set to reach 216m monthly active users in 2023 (according to nScreenMedia). “We’re open to all these different models that are out there right now…we are keeping an eye on that segment for sure,” Sarandos admitted.
Kantar Entertainment on Demand study in Australia, recently found service cancellations remained high in Q4 2022 with over 1.3 million SVOD services cancelled. While a lower proportion of SVOD churners left the category entirely (29%), an increasing number of households did not replace cut services as they began to trim their SVOD portfolio; nearly one in four SVOD households plan to cancel a service in the next three months.
The trend doesn’t come as a surprise. The Reserve Bank of Australia handed down its ninth-straight interest rate hike in February 2023, putting even more pressure on Australian households that are already enduring a cost-of-living crisis. Australians need to dedicate more of their monthly budget towards essential housing expenses, including mortgage and rent payments, groceries, phone plans, petrol, electricity, and insurance.
From cord-cutting to cost-cutting
As recently as July 2022, Australian households were spending $4,500 a year on entertainment, with streaming and gaming taking the biggest slice. Now, it seems that people are questioning whether that level of spending is sustainable, and it’s the value-driven subscriptions that are surviving amid the cost-cutting measures.
As reported in Samsung Ads’ Behind the Screens study, ad-supported video on demand (AVOD) experienced the fastest growth in viewing time in the second half of 2022.
AVOD and FAST were once seen as noise, caught up in their own battle with SVODs for audiences. However, there was something in the formula and FAST has become one of the industry’s biggest talking points. If streamers can embrace the principles of FAST - engaging, premium, free, easy to discover, online content funded by relevant advertising, they can put themselves in the FAST lane for success.
Netflix recently changed tact by launching a lower-cost subscription tier, ‘Basic with Ads’ in November to slow down the departure. Binge also announced it is set to introduce ads on an entry level tier “Binge Basic” at the end of March.
It’s all relative
Of course, consumers still love the convenience of watching as much as they want, when they want, without or without ads. But, the perceived cost of that convenience has gone up as discretionary income has gone down. Especially as popular content has become dispersed across multiple streaming platforms and 49% of consumers spend so long deciding what to watch that they end up watching nothing at all.
Consumers have questioned whether it’s really worth paying an average of $62 on entertainment subscriptions every month and they want more value out of every platform they decide to keep in their lives.
Value is being re-evaluated
Netflix and Disney may have invested heavily in their content catalogues, but premium content alone doesn’t guarantee success.
Kantar’s study in Australia also found that Amazon Prime Video took the lead in attracting new subscribers with almost 20% share and considerable share growth was enjoyed by Paramount+, which accounted for 16% of new SVOD subscriptions, largely on the back of attractive Black Friday deals.
Consumers also want to be able to discover content easily and the user interface needs to offer viewing options in a convenient and relevant way. People don’t want to spend hours trawling through extensive content libraries and as a result, FAST services, such as Fetch TV, Samsung TV Plus and BVOD FAST channels are gaining traction.
On Demand and ‘Binge’ culture has developed over the years and consumers enjoy the experience of being able to sit back while episodes continue to roll on for them seamlessly. FAST channels, which follow a linear programming format, offer a simple and straightforward viewing experience from anywhere that a viewer can connect online.
As streaming platforms shift to hybrid and ad-supported models, they will need to consider how to provide a best-in-class ad experience. Offering enhanced relevance, shorter duration, and reduced frequency will be key to retaining subscribers, engagement with ads and delivering results to advertisers.
Shifting tides
Tapping into the factors that have made FAST such a compelling value proposition will enable the streaming giants to expand their audience (and advertiser) pool. Consumers may be accepting ads in return for lower subscription fees, but they still have high expectations for the viewing experience.
Alex Spurzem is general manager at Samsung Ads ANZ