Hint: Make it about the customer, not just the content
For video streaming services, 2020 was a banner year. With movie theaters and live entertainment largely shut down and travel and dining options limited, consumers found entertainment close to home. But as they feel more confident about re-engaging with the plethora of pre-pandemic entertainment choices, their reliance on streaming video might well wane. So what trends should TMT companies watch for?
To find out more about consumer preferences, we surveyed 1,000 US consumers ages 18 to 59 with annual household incomes above $40,000. We then compared the answers to surveys from 2013-2019. Among the questions we asked:
A pretty sunny picture of consumers’ video experience emerged from our survey. More than four out of five respondents (83%) were well pleased with their options, up from 73% a year ago. A significant portion — around 40% — described themselves as “happy,” “excited” or “satisfied” with their video viewing experience. And consumers kept their cable TV subscriptions, pausing an earlier downward trend.
But we also learned that customers are increasingly calling the shots. To keep satisfaction levels high as streaming services proliferate, we believe TMT companies should be laser-focused on the customer experience, fueled by data that allows them to engage contextually with each customer as a “segment of one.” In fact, we expect customer-centricity to be the theme that drives growth for years to come.
Around 40% described themselves as “happy,” “excited,” or “satisfied” with their video viewing experience.
In 2020, more than two-thirds (68%) of US households maintained their cable TV subscriptions, the same share as in 2019. But these same consumers also spent time with streaming video, watching subscriber supported video-on-demand (SVOD) almost twice as often as ad-supported (AVOD) content (62% versus 32%). In 2019, survey respondents used, on average, slightly more than 6 streaming services, a total that grew to almost 8 in 2020. Pay TV subscribers aged 35-49 showed the strongest inclination to use additional services.
Consumers accessed content on a variety of devices, either directly, through apps or through content aggregators such as Amazon Prime, Apple TV, Roku, and others. And they have an enormous variety of content to choose from. With all of these choices and options, it would be reasonable to expect winners and losers in the streaming wars; consolidation will continue to change the landscape.
Following the launch of Disney+ and Apple TV+ in 2019, consumers saw the introduction of HBOMax from WarnerMedia, Peacock from NBCUniversal, and Paramount+ from ViacomCBS in 2020, and Discovery+ in 2021. Each attracted tens of millions of subscribers in a matter of months.
Our analysis shows that breadth of content still is the major factor consumers weigh when choosing a streaming service. When asked what they liked about their favorite services, “ease of use” was the most influential factor, and “I know I’ll always be able to find something to watch,” outranked the quality of content.
This speaks to the importance of a clean, intuitive user interface (UI) that understands consumers even better than they know themselves. Streaming services are already making headway on UI; as consumers juggle multiple services, it will take on increasing importance. The ability to delight customers and exceed their expectations can be a crucial differentiating factor.
Nearly one-third (31%) of survey respondents, for example, said that easy, personalized content recommendations would be a reason for staying with a streaming service. Even amid the generally favorable view of video entertainment, 29% of respondents said they were often “frustrated” or “overwhelmed” by the array of choices on offer.
To avoid such frustration, streaming services may need to kick their recommendation algorithms up a notch, perhaps through more seamless integration with social media platforms, gaming networks, and other hubs of digital consumer experience.
The importance of advanced personalization can be seen in survey respondents’ wish list for better content discovery that includes viewing recommendations based on factors such as mood, length of content, who they are with, and what content they are currently watching.
Companies could improve discovery in ways consumers may not yet have considered—perhaps by tapping into the effect of social media on consumer habits. Search algorithms could factor in the influence of a consumer’s network of Facebook friends or gaming enthusiasts, or filter recommendations based on viewer responses to prompts during the search process, perhaps asking who’s with them or what mood they’re in, if their search process stalls.
Implications: The secret to better search lies in data
To make search and discovery ever-more customer-centric, TMT companies need to fundamentally change the way they present content to subscribers, evolving from the era when “content is king” to one when “consumer is king.”
Consumers have more premium content at their disposal now than they can possibly consume. But it is increasingly scattered across platforms, so the mantra “if you build it, they will come” doesn’t apply anymore. Content providers need to think about how their customers will search for — and easily access — the content they seek.
So how should TMT companies approach this challenge?
Data is a start. Companies will need to find ways to leverage the massive amounts of data about consumer behaviors and preferences currently generated by streaming services themselves, by third parties such as aggregators and smart device manufacturers, and by consumers themselves.
The “consumer is king” mindset applies in another aspect of the video entertainment experience: managing costs. Our latest survey showed that 46% of respondents paid more for video in 2020 than they did in 2019, and 59% expect to pay more a year from now — an indicator of how central this activity has become in consumers’ daily lives.
But their pockets aren’t bottomless. The two main reasons for downgrading or unsubscribing from a video service were cost-related.
Almost two-thirds of respondents (63%) said they’d be willing to see more ads if it meant a lower subscription cost. When asked if they would prefer to see fewer ads that “aren’t interesting to me,” 72% agreed. This suggests consumers expect ads to be as relevant as the content they’ve chosen to watch, an expectation that poses challenges for streaming services, ad creators and brands.
But how willing are consumers to share with streaming providers the personal data needed to determine whether ads are relevant? Slightly more than half of respondents expressed a willingness to share data; the rest will need to be won over. To do so, we recommend that companies find ways to build trust and offer real value in exchange for data leading to more relevant advertising.
Ad spend on connected TV and OTT services, which was $8 billion in 2020, is projected to grow to $11 billion in 2021. SVOD revenues are projected to grow at a CAGR of 10% through 2025. By then, they will be twice the size of box office revenues.
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Implications: Boosting engagement requires advanced analytics
Cost-conscious consumers may offer SVOD companies an opportunity to bolster revenues by offering some pricing options that include ad viewing. Targeted customer data enables streaming services to offer personalized ads. Like AVOD providers, however, they will want to present advertising that genuinely appeals to consumers — and in formats that don’t detract from the viewing experience.
Because 80% of American households now own at least one internet-connected device for viewing TV, advertisers have access to more data than ever before about which ads consumers watch and how they respond to them.
SVOD services: Explore which subscriber segments could be most receptive to viewing ads, and from which types of advertisers, as a complementary monetization strategy.
AVOD providers: To demonstrate value to advertisers, use enhanced algorithms to target ads, measure viewer engagement and provide a feedback loop to brands.
Advertising creators: Use viewership data to craft appealing ad formats, perhaps building on ad placement techniques or product placement experience.
Explore using advanced algorithms to present ads based on factors such as time of day, type of device being used, and length of content desired, in addition to demographic and behavioral data.
In taking control of their viewing experiences, consumers clearly notice what it feels like to use a streaming service — how easy it is to join, to use every day, to leave and potentially rejoin. In effect, consumers are taking unbundled content and re-bundling it according to their personal preferences. Consumers may find this more difficult as content is moved into “walled gardens” — unless companies are willing to offer recommendations beyond their own platform. (Some start-ups are already seeing the need for this type of service.).
Our survey revealed factors other than cost that influenced consumers to unsubscribe from a streaming service, as well as factors that might induce them to stay.
Services now have the technology to treat each consumer as a “category of one,” creating the kind of personal experience that cements customer loyalty. For consumers who agree to be identified by logins, services could create hyper-personalized bundles of content, making their service a “must have.”
As the streaming market becomes more saturated, and with the cost of developing or acquiring content running into the millions — and even billions — of dollars annually, emphasizing customer-centricity and attending to the entire customer journey takes on much greater importance.
Implications: Smooth the customer journey with data
Data is essential in attracting potentially profitable customers and keeping them. It is also critical in managing the customer journey — one of the reasons companies like Disney, NBCUniversal and others have established direct-to-consumer relationships.
Find ways to build direct customer relationships instead of relying on third-party data. As necessary, collaborate with business partners to obtain the kinds of analytic insights that clarify customer behavior and preferences
Strive to define a “category of one” for every customer, then reinforce this personal relationship at every touchpoint and phase of engagement.
Enhance existing customer analytic capabilities to devise pricing, marketing and retention strategies that mesh with enhanced customer journeys.
Customer insight should lead to specific, measurable strategies related to managing customer relationships and customer journeys.
The streaming boom of 2020 may very well set a new growth trajectory for this segment of the entertainment industry, but taking advantage of opportunities will require new strategies, including innovation in creating value from the enormous subscriber base video services now possess.
In an increasingly crowded marketplace, meeting consumer expectations cost effectively may be the greatest challenge. Success is likely to require companies to focus on improving the experience of customers by, among other things, building communities of users who can interact with each other, thus sustaining their engagement over the long term. Data and powerful analytics will play a key role in this effort.
Principal, Media and Entertainment, PwC US
US Entertainment, Media and Communications, PwC US
Technology, Media and Telecommunications Advisory Leader, PwC US