Competitive shakeup

We’re about to witness a shake-up in video streaming. New heavyweight services are launching, while existing heavyweights are ramping-up their investments.  Local players are revising their strategies, and barely a day goes by without the announcement of new, niche services in the pipeline. While every streaming operator claims to have the right answer, new research by EY into the digital home sets out what consumers are really thinking.

A nation of streamers

Firstly, some scene-setting… We’re all fully aware that the UK has embraced streaming. It’s hard to overstate the influence of the UK’s big broadcasters on building familiarity and fulfilment with online video. They have created a wave that global, streaming powerhouses have surfed successfully, building scalable subscriber bases. According to recent EY research of 2,500 UK households, 30% now claim streaming is their primary way to watch TV programmes and films at home. Cast an eye towards the future generations, those aged 18-24, and the share more than doubles to 64%.

Critical questions

If we’ve learnt anything from the US experiment in “cord-cutting”, it’s that today’s video viewers are more discerning. Simply put, they want more for less but put politely, they expect value for money. It is a small wonder that 45% of households see better value from their streaming providers than from pay-TV operators. What does this mean in practice? Well, for any streaming service there’s the basic housekeeping that should not be neglected; quality of connection, customer experience, user interface, intelligent recommendation engines. Everything else is strategic, which leads to two critical considerations:

1. Investing in quality

With every new investment in rights and talent, the competition for content escalates. Single episodes of scripted drama cost more than $10 million with showrunners, scriptwriters and on-screen talent being snapped-up and locked-in. Ironically, it’s not all about those with the deepest pockets. Streaming services have been shrewd in their investments, mixing local content (often sourced from their competitors), reimagining old brands to quench audiences’ insatiable thirst for nostalgia and sprinkling in occasional stardust shows. It’s a strategy that seems to be paying dividends.

Among all channels and content services in the UK, including the traditional public service broadcasting (PSB) channels, the leading pureplay streamer ranks third for the best quality of content (13%). Among younger audiences, those aged 18-24, over a quarter (27%) believe the leading streamer has the best content of all services and channels.

2. Defining the role of advertising

As we know, streaming operators have chosen a mix of different business models. Many are still in their growth phase and enjoy the freedom to focus on top-line growth with, hopefully, profit to follow. Other services are loss-leaders or in some way an add-on to legacy, media businesses. In all these models, the role that advertising plays is intriguing, perhaps even contentious. Despite its pedigree as a stalwart among media industry revenue streams, it’s easy to question advertising’s future. The assumption is that advertising at best needs a rethink and at worst is just a turn-off for audiences.

In the mind of audiences, streaming is somehow different. 38% of households are more accepting of adverts on “traditional”, broadcast television than on streaming services. It jumps to 54% for those aged 18-24. As streaming services think about the role of advertising, vs subscription, perhaps a more compelling story is that 18% of households would pay a premium to stream content without advertising. It’s a percentage that grows each year.

The impending and exciting changes to the UK’s streaming landscape will see new entrants chase market share and incumbents evolve to compete. Expect to see a mix of strategies, expect to see uncertainty but above all, expect to see a granular appreciation of consumer preferences as key to success.

Further information:

For more information see the new EY report, Zooming in on household viewing habits

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.

All statistics referred to derive from the recent EY research on the Digital Home. View the reports at: ey.com/uk/tmtdigitalhome2019 and ey.com/uk/tmtviewinghabits

Watch the UKTN interview with Martyn here.

Supported by
Martyn Whistler

Media & Entertainment Global Lead Analyst at EY

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