Given declines in subscription growth and higher churn, it’s time for streaming services to think more boldly and creatively about where to find additional revenue. Companies will need to think beyond ads as a source of revenue growth to meet investors’ expectations — beginning with exploring new ways to monetize existing consumers. Two promising options are turbocharging product placement and capitalizing on the metaverse. Here we’ll talk about how creative approaches to product placement can translate into big wins for streaming companies.
Product placement has been a staple of television shows and movies for decades. Who can forget the Teenage Mutant Ninja Turtles’ love of Pizza Hut, or ET’s fascination with Reese’s Pieces, or James Bond’s preference for Aston Martins? More recently, Ryan Reynolds’s gin and Dwayne “The Rock” Johnson’s tequila made some not-so-subtle appearances in the Netflix feature “Red Notice.”
While product placement is generally agreed to be effective — Reese’s reportedly estimated the company saw a 65% jump in sales of its candy after it helped ET phone home — it’s been challenging to quantify its impact. Advertisers know how many people see their product, but the direct tie between a product’s appearance in a show and actual purchases remains fuzzy. Simple product awareness or mindshare doesn’t necessarily lead to actual conversion.
Streaming changes the game. By enabling viewers to voluntarily pause content on their terms, streamers can create opportunities for viewers to engage with activities outside the content in a seamless experience, creating commerce opportunities in the process.
Here’s a simple example. Let’s say you’re sitting on your couch watching “Squid Game” on Netflix. Halfway through an episode, one of the costumes in the show really catches your eye — it would be great for an upcoming costume party. Deciding to buy it, you pause your episode on a scene featuring the green tracksuits and a pop-up in the top corner says, “Squid Game Costumes: Official Merch Available.” You can click “add to cart” to add the tracksuit to your in-app shopping cart and finish buying later or click “view more” to navigate to Netflix’s official merchandise store or a Netflix commerce partner to make the purchase immediately.
Maybe you also watch the episode about Dalgona candy and want to learn how to make it. You again pause the episode and see in the top corner, “Interested in the recipe? Click here!” and navigate to a Netflix partner website. Netflix would monetize this non-Netflix content through affiliate marketing.
In addition to merchandise and affiliate marketing revenues, streamers can benefit from collecting potentially vast amounts of data on customer purchasing habits. Not only what they’re buying, but when, and what triggered it. This purchasing data, paired with analytics, can help streamers continually improve product placement, inform future content decisions, guide tomorrow’s merchandise releases, and more.
Arguably, intellectual property owners with existing e-commerce capabilities, such as Amazon and Disney, are the best positioned to drive traffic to and directly sell owned products and content. Thus, they stand to benefit the most from evolving product placement. Other companies, which own IP but lack a commerce function beyond selling subscriptions, need to build partnerships with e-commerce providers to directly monetize. Content licensers also can benefit — by collecting fees from merchant partners or IP owners and, as noted in the example above, driving revenues through affiliate marketing.
Don’t wait for a leader to corner the market
Product placement and the metaverse represent just two areas that are ripe with new-revenue opportunities for streamers. We expect other others to emerge as streamers continue looking for ideas to boost revenues amid declining growth.
Of course, bringing these new ideas to life isn’t easy. For instance, to evolve product placement, streamers will have to reinvent their capabilities, technology stack, and organizational design — building teams across data, retail partnerships, and affiliate marketing — to expand on current revenue monetization models.
In next month’s column, we’ll discuss how streaming providers can drive new growth by getting smart on the metaverse.
Mike Chapman is a Partner and Americas Media Lead in the Communications, Media and Technology (CMT) practice of Kearney, a global strategy and management consulting firm. He can be reached at [email protected].
"Industry Voices" are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not necessarily represent the opinions of the editorial board.