Streaming has grown up – Industry Voices: Buffone

John Buffone Industry Voices

It happens to us all, one day you look back and you’re old(er). Guess what streaming video, you matured.

And suddenly, your investors want profits, your content costs more, and your customers' wallets aren’t as full. This is it, the kind of triple threat no business wants to see but most must manage through. Granted, the theatrical experience is returning, and our supply chain will be filled with more new movies. But make no mistake, this is no longer the roaring pandemic-fueled viewing environment of merely two years ago. Winning, growing, and merely surviving will require financially disciplined content production as well as refined licensing and distribution strategies.

The demo driving churn grew up too, really, so what?

Many of us streamed our first TV series around 15 years ago, probably on Netflix. But the direct-to-consumer network model is quite a bit newer. You know, all the “pluses,” Discovery+, Disney+, Paramount+, that launched roughly three years ago. As businesses migrate from early adopters to mass market consumers there is a commonality nearly all share, a shift to an older demographic. Streaming is no different, as its now viewers aged 35-54 that are driving switching behavior.

Being a researcher for around 25 years and likewise, right in the heart of this demo, I’ll share some statistics that demonstrate the heightened level of engagement. Viewers aged 35-54 are now the most likely to subscribe to all five of the top five subscription video-on-demand (SVOD) services – not some, all of them.

It’s not just about SVOD, it’s about a growing propensity to supplement that with free ad-supported streaming TV (FAST), services like Pluto TV. People who know me know I tune into the Bob Ross Channel on Pluto, painting a picture yet – happy trees? It’s also about the future and that’s where interest in adding or cancelling TV services also increased significantly among viewers aged 35-54.

There are numerous factors influencing this change including younger, less affluent viewers being impacted more by inflation and older viewers being slightly later adopters that are now exhibiting elevated TV service switching behaviors. The bottom line, expect a new wave of migration from linear to streaming and significantly increased competition to keep these viewers' attention. Not an easy environment to manage.

Let’s talk winning, it will come from marketing to today’s heavy streamer

In the TV and movie industry our best customers are typically our most avid viewers and the same still holds true.

There is a base of 28 million households that use all three digital distribution channels: SVOD, FAST, and transactional digital. The thing is, their engagement with one does not suffer due to the other, as they are heavier users of each of these three sources. Further, their future intentions are net positive and highly elevated with around four times the likelihood to add and cancel TV services. These premium customers are incredible distribution targets but also come with a high churn risk. The key is to super serve them.

Viewer’s needs are rudimentary: programming, search, and quality of service

Here’s the good news, viewers aren’t looking for anything complex, they want to be able to easily find the movies and TV shows they want to watch. And please don’t over complicate the user interface.

It’s also clear, this coveted viewer has a discerning eye for alternate options. Nearly half of the time they churn because they recognize the competitions content superiority. Clearly, the programming strategy needs to lead. As such strong content will continue to sell at a premium while distributors become more cautious about licensing B-level programming.

Meanwhile, these streaming services will further mature, ugh we’re getting older. As rates go up programming will get tiered more akin to the old school cable packages of the 80s. Determining the optimal content distribution channel/tier will be key to maximizing average revenue per user. And who knows, maybe more viewers will tune-into Bob Ross with me.

John Buffone is a vice president and industry advisor at The NPD Group. With over 20 years of experience in the consumer research and entertainment industries, John has advised many of the largest media and consumer technology brands in the industry.

He offers his industry expertise on trends that focus on how connected devices are rapidly changing the way consumers use technology at home and on the go. His research focuses on the confluence of digital content distribution and consumer electronics trends.

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by Fierce Video staff. They do not represent the opinions of Fierce Video.