As digital media evolves, so too do the ways in which we consume content. While streaming video-on-demand (SVOD) has become increasingly popular, many consumers are growing frustrated with the various services available to them. In a recent report from Deloitte, it was revealed that chasing content across many services and losing content when it leaves a service were among the top complaints of SVOD users.
Gen Zs are the most cost-conscious of all generations, and they’re among those most likely to churn: They’ve canceled a subscription or added and then canceled one in the last six months. Younger viewers frequently cancel and rejoin to manage costs. This is yet another approach to taking advantage of new offers and discounts from SVOD providers.
It’s not all doom and gloom for streaming services, however. The report also found that most respondents overall still prefer streaming TV and movies at home over any other type of entertainment. But in order to keep users happy, it’s clear that streaming providers need to do more to improve the retention rate of their subscribers. Otherwise, they’ll continue to lose out to more traditional forms of entertainment – or even just watching digital content for free on YouTube, TikTok, etc.
Interview With Deloitte Leader, Jana Arbanas
We reached out to Jana Arbanas, Deloitte’s California-based technology, media, and entertainment sector leader, to learn more about the 2022 digital media trends report and what marketers should know.
Here’s what she had to say:
On the whole, it seems like streaming services are still trying to find their footing when it comes to customer retention. There however without some customer complaints that streaming video-on-demand services need to take into account.
Younger generations are ditching SVOD services due to price. Besides ads, what are other ways SVOD providers can increase revenue and retain this demo?
Jana: Many people are churning due to cost considerations and lack of new content. Our data suggest that some bundling and other perks, like access to first-run movies, a loyalty program, or another streaming service, would convince subscribers to stay with an SVOD service they might otherwise consider canceling.
We also see that those in younger generations churn through SVOD services more than those in older generations, and they are also drawn to more social and interactive experiences often found on social media and gaming platforms. For instance, Gen Z respondents globally cited playing video games as their favorite entertainment activity.
While not every experience needs to be social and interactive, SVOD providers should be aware of the changing shifts in the entertainment preferences of younger generations. We are already seeing media companies acquiring more gaming properties, but they can also look to optimize content production and reduce their own costs.
Consumers are prepared to give up ad-watch time in return for a lower SVOD subscription plan. Is this enough to keep subscribers around?
Jana: We see that cost considerations are important for people, but they also seek new and interesting content from their SVOD subscriptions. Some people are willing to hop around from service to service, chasing the content that keeps them engaged.
One-quarter of US consumers have canceled a streaming video service in the past 12 months and resubscribed to the same service, with younger generations significantly more likely to do so. People are also finding engaging and personalized content through user-generated video online – with around four in 10 US respondents saying they spend more time watching user-generated video than they do TV shows and movies on video streaming services.
Continued investments in content and more targeted recommendations systems – and a focus on offering audiences (especially younger generations) interactive and immersive experiences – could help SVOD providers move forward.
You mentioned metaverse, how will SVOD providers leverage this new medium? And, why should they?
Jana: If we consider consumer metaverses, social gaming may be the most mature example. Already, studios are marketing their IP in top social games with crossovers and branded events and selling digital and physical merchandise to players. They’re doing this because social games have aggregated large audiences of younger generations that not only interact with each other but are also personalizing their game avatars with digital goods.
This trend in virtual socialization and personalization is one of the reasons we’re now talking about the metaverse. But whether we call it social gaming or metaverse, these immersive and social experiences are becoming more popular – and taking greater shares of entertainment time. There will probably always be demand for TV and movies but SVOD providers and studios will likely need to expand their presence and be creative about how they can engage younger generations in social and immersive worlds.
Netflix, Hulu, Amazon Prime Video, Disney Plus, and HBO are all vying for global domination of streaming video. In a saturated market, how can these providers set themselves apart to attract and retain subscribers?
Jana: People choose an SVOD service because it’s cost-effective and offers new, original content and a broad library of content. So, it’s likely that providers will continue to spend heavily on content to attract and retain subscribers, but they will also seek ways to lower their production costs.
SVOD providers may also create cheaper – or free – subscription tiers with ad-supported packages, time-delayed access to content, and bundles with other services. This can make it easier for more cost-sensitive users to stay subscribed even during a content drought. Providers could retain subscribers with perks like loyalty programs and access to first-run movies – VIP tiers that cost more can offset cheaper subscribers.
Still, in all the countries we surveyed (the US, the UK, Germany, Japan, Brazil) younger generations are more likely to churn through their SVOD services, so keeping a close eye on those segments and their preferences – which tilt toward more social and interactive experiences – will be important for retention.
Social media, gaming, metaverse, and SVOD are forms of digital entertainment that compete for our attention. What are the implications for digital media companies?
Jana: Competition is increasing among digital media providers and people are expecting more from their entertainment experiences. Digital media companies will be challenged to stay attuned to the changing preferences and desires of their audiences.
Our data show that people, especially young generations, are leaning into social media and gaming experiences – which offer them immersive experiences, socialization, and personalized content and recommendations. Not all experiences need to be social and interactive, but SVOD providers especially should be aware that more audiences are finding entertainment, community, and even meaning, elsewhere.
Digital media companies may need to expand their presence across social and gaming to stay in the conversation, drive interest, and meet younger generations where they spend their entertainment time.
What impact will churn have on SVOD providers in the next 5 years?
Jana: There’s been a lot of focus on subscriber acquisition but retention of subscribers is now equally important. A monthly subscription needs to last long enough to at least recoup acquisition costs and hopefully support content spending and marketing costs. If churn is high, the economics get harder. This can drive subscriber prices up. But as more SVOD providers pursue global markets, subscriber prices can become diluted.
A given country may not be able to support higher prices. So, churn will also drive cost-cutting on the production side. We may see more providers focusing on cheaper content while premium providers offer more expensive content but maybe not as much of it. It might become too expensive to play in the middle.
Churn is also driving more bundling of services to reduce overall subscription costs for consumers. But it could push providers to acquire more properties to reach more audiences, like gaming companies. We could see a near-future of media companies that offer TV, movie, and gaming experiences under the same brand, or at least on the same data platform that can meet customers and reinforce their value.
In the Deloitte study, 60% of respondents said they’re more likely to cancel their SVOD service if it lost content they wanted to watch. This is a key metric that providers will have to focus on in order to reduce churn and keep customers happy.
SVOD should invest heavily in the metaverse, as it will play a big role in digital media trends over the next few years. The metaverse is a digital universe that people can explore and interact with, and it’s becoming more popular as technology advances.
Finally, content providers need to focus on delivering an excellent customer experience if they want to retain customers. This means making it easy to find and watch content, providing recommendations, and offering customer support when needed.
Connect with Jana Arbanas on LinkedIn to learn how you can leverage this 2022 digital media trend in your business.
Thanks, Jana for taking the time to respond to our questions.