Video streaming shakeup

Survey of consumer attitudes and preferences

Consumers have found their video consumption groove, evidenced by three key trends:

  1. Cord-cutting has slowed—consumers who still have pay-TV recognize that it fulfills a need in their video service portfolio.
  2. Once a revolutionary shift, streaming has become commonplace—90% of consumers are watching video content over the internet.
  3. Consumers have seemingly settled into their video service portfolios, having curated a selection of services that meets their content needs.

However, this might be the calm before the streaming storm. As enticing new players enter the market and content libraries become more fragmented, consumers must prioritize and strategically manage their video service portfolios to ensure access to the content they want, or to even know what is available to them.

The question for consumers is no longer “How do I watch?”, but “What do I keep and what do I cut?” Services that don’t provide their audience with a clear value proposition and a seamless user experience run a real risk of attrition in the future.

Methodology: In October 2019, PwC surveyed a sample of 2,016 people in the United States, aged 18-59, with annual household incomes above $40,000. We analyzed our results against similar studies we administered from 2013 to 2018.

Key findings:

  • The percentage of total pay-TV users remained stable at 68% in 2019, compared to 67% last year. This is in stark contrast to the 6% decline we saw from 2017 to 2018.
  • While usage of Netflix continues to surpass that of pay-TV, its usage showed signs of slowing this year. Other players in the market, such as Hulu and HBO Go, continue to grow and gain market share.
  • Consumers are happy about the state of video today, with 76% saying they are satisfied with their current video services.
  • Though satisfied today, consumers surveyed are still looking for the next big thing. Half of consumers say they intend to subscribe to new entrants in the market, such as the just-launched Disney+ and Apple TV+ and the much-anticipated HBO Max and NBCU’s "Peacock."
  • Consumers know how to get the content they want—64% of respondents who intend on subscribing to new a new video entrant say they would downgrade or terminate one of their current video services to do so.

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How will new streaming services shift marketplace and subscriber demand?

Putting the brakes on the cord-cutting revolution

In 2019, those who had a tumultuous relationship with cable cut the cord, and those who have stuck with it say they recognize that it fulfills a need in their overall video portfolio. Total pay-TV subscribers has remained consistent at 68%, compared to 67% in 2018. The number of traditional pay-TV subscribers also has remained consistent year-on-year (YOY). In contrast, the number of cord-cutters has declined YOY for the first time in five years.

Netflix continues to dominate the market and surpass pay-TV in usage, but the company's growth has noticeably slowed in recent years. Amazon Prime and Hulu, on the other hand, continue gain market share.

Increasingly fewer pay-tv subscribers are solely watching TV through their cable subscription—77% are accessing TV content on the internet, up from 72% in 2018. Pay-TV users also account for the lion's share of streaming subscription growth:

  • In 2019, pay-TV users also subscribe to five additional video services on average, up from four in 2018.
  • Cord-trimmers spread their wings the furthest, averaging 10 additional video services alongside their pay-TV subscription; however, they are also the least committed. Cord-trimmers are the most agile at managing their video content portfolios because they are primarily motivated by content—they are more likely to start or stop a subscription because of content. In fact, 40% told us they are actively looking to unsubscribe from at least one of their current services.

The calm before the streaming storm?

Just two years ago, 60% of consumers said the video content space was more overwhelming than ever before. Today, the majority of consumers are decidedly happy: 76% say they are satisfied with their video subscriptions and 73% are satisfied with the quality of original content offered.

When asked specifically about the abundance of options in the streaming space today, consumers say they’re “happy,” “fulfilled” and “excited,” which suggests that most have curated an ideal combination of video content options for their needs.

A happy outlook persists even as the cost for video content rises. In recent years, consumers have been optimistic that video content costs would decline, but this year we see that trend reverse—on average, consumers are spending roughly $76 a month on video content, an increase of $5/month year-on-year.

When asked if they expect to pay more or less for video content one year from now, 60% said they expect to pay more.

There’s a general expectation that current services will continue to increase their prices, yet 33% of consumers expect to invest more in new services that are launching this coming year, and 21% are willing to pay more to gain access to ad-free content.

The video streaming wars are intensifying

Bottom line—consumers are willing to spend more to get the content they want, which is good news for brands launching new streaming services. Half of all consumers surveyed indicated some level of interest in subscribing to at least one of the new video services being launched in the next six to 12 months.

However, unaided awareness of new streaming services could use improvement. When asked if they could name any new market entrants, 51% of consumers said they couldn’t think of any.

When prompted with brand names for level of interest, consumers are especially excited for Disney+, which isn't surprising given Disney's significant promotional campaign for its launch this past November. ­

It's important to note that streaming services scheduled for 2020 launch, like NBCU’s Peacock and WarnerMedia's HBO Max may not have yet ramped up their promotional marketing campaigns. In particular, we anticipate interest in Peacock to increase as more details emerge related to the likely ad-supported offering.

Consumers are largely interested in new streaming services for original and exclusive content. However, a closer look at individual services reveals some differences:

Prospective Disney+ subscribers are attracted to its historically family-friendly selections:

  • 59% are motivated by original content
  • 49% are motivated by exclusive content
  • 28% believe they’ll always be able to find something enjoyable to watch
  • 22% say they’ll subscribe because the content appeals to their family

Prospective Apple+ subscribers are motivated by the company’s reputation for easy-to-use products:

  • ­48% say they’ll subscribe because of its original content
  • 31% are motivated by exclusive content
  • 30% think it’ll be easy to use

Primed by HBO’s production history, consumers have high expectations for HBO Max’s expansive content library:

  • 56% are motivated by original content, like Game of Thrones and Sex and the City
  • 48% are motivated by exclusive content, like Friends, South Park and The Big Bang Theory

How many streaming services can one consumer really handle?

Though consumers are settled into streaming and are largely happy with today’s video content landscape, rising costs and an ever-greater abundance of options have brought us to the precipice of yet another great shift, in which consumers have the confidence to decide exactly what they want in their video service portfolio.

A quarter of all consumers are actively looking to unsubscribe from some of their services, citing a lack of need, perceived worth and making room for another service as top reasons to terminate.

Many consumers already know how to get the content they want, strategically maneuvering in and out of subscriptions to curate their library of content. This mindset may only increase in popularity as an onslaught of new services enter the market.

Nearly two-thirds of consumers who intend on subscribing to a new video service would terminate or downgrade one or more of their current subscriptions to make room for a new one.

The golden era of streaming could be coming to an end: a few points to consider as the streaming wars heat up in 2020

  • Price yourself right. Video consumers are particularly cost sensitive. Of all possible factors, a lower monthly cost has the strongest influence on a consumer’s decision to subscribe (or not) to a service, and too high of a cost is largely responsible for subscription cancellations. As competing services continue to crowd the market, pricing will increasingly be key to customer acquisition, churn, product sustainability and success. However, don't confuse this with a race to the bottom. Create a value proposition by pricing your differentiation with an entry point that wouldn't turn away curious consumers.
  • Design your content strategy with your target segments in mind. Our research tells us that the most important factor (after price) for growing subscriptions and developing brand loyalty is still content. If you are sitting on a library of any size, monetize it! The entry barrier for creating digital channels is very low, so how can you bundle your library into content packages that will appeal to audiences? Use data gathered from the success of those library-based channels to consider investments in original programming that would appeal to your base.
  • Streamline the streaming experience.  Having access to a lot of content can be overwhelming for many, but as we’ve seen, it’s a key ingredient to gaining and maintaining subscribers. Ease of use and reliability are linked to depth of engagement and are essential for driving retention and preference among video services. Make it easy. Make it fun. Make it cool. Make it something consumers will want to tell their friends about or post on social media.
  • Outskill your competition. Is your resource mix capable of delivering next-generation strategies and solutions? Companies are in fierce competition to leverage the newest technologies in order to deliver products and services to tomorrow's market. To produce at this caliber, teams will have to address if their existing resource mix, which has been delivering today's products and services based on yesterday's capabilities, has the skills, experience, resourcefulness and drive to produce for the markets of the future.
  • Explore strategic content partnerships. Thinking outside the box with strategic partnerships can help drive demographic categories en masse to your products and services. Sports and news are the last mile for streaming and need to be considered within the overall portfolio mix. Whether it be a unique take on a content offering, entry into an adjacent space or partnering to create a new capability, innovative strategies and risk-taking are necessary to stay relevant in today's and tomorrow's markets.
  • Keep a lens on privacy regulations and embrace them. Consumer privacy is at the forefront of companies everywhere, and will become even more prevalent within the media ecosystem. Instead of treating the oncoming wave of privacy regulations as a negative, view it as an opportunity to learn about the consumers and earn their trust. In this highly competitive market—in which privacy is non-negotiable—companies that solely look to check the box by doing the bare minimum, without embracing consumer experience, may find that their consumers are unwilling to risk their privacy and may choose to switch to a more secure provider.
  • Consider a tiered model and loyalty programs. Explore loyalty programs—the cornerstones of hotel chains and airlines. For example, customers logging enough viewing hours can either get a discount on a sole-priced model or a free upgrade in a tiered model.

Contact us

Mark McCaffrey

US Technology, Media and Telecommunications Leader, PwC US

Gregory Boyer

Technology, Media and Telecommunications Partner, PwC US

Todd Supplee

US Entertainment, Media and Communications, PwC US

Dan Priest

Technology, Media and Telecommunications Advisory Leader, PwC US

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