Consumers of streaming services are eventually going to have to pay more for less. So why stick around?
When Apple Inc. and Walt Disney Co. plunged into video streaming in late 2019, shortly before the pandemic hit, content-gobbling consumers were in hog heaven: The entrance of the two media giants into the fledgling market, coupled with a ramp-up in programming from market leader Netflix Inc., had spawned an all-you-could-eat buffet of movies, series and documentaries.
Aaron Goldman, chief marketing officer at advertising-software provider Mediaocean, describes it as a saturation point in streaming. “The platforms have to find new sources of growth while being responsible about expenditures,” he said. “Raising prices is one strategy, but that’s hard to justify to consumers while cutting back on content at the same time.”
Advertising is emerging as a “critical lever” in navigating the equation of maintaining revenue while scaling back pricey content, Goldman said in an interview. By increasing adoption of ad-supported tiers and increasing ad load within those tiers, platforms can “better monetize without significant outlays for new content,” he said.
“As we improve our member experience with more must-watch stories, we also need to improve our monetization,” Netflix executives acknowledged in a letter to shareholders in April. “This will not only help reaccelerate revenue growth and increase operating margin, it will also enable us to invest more in great entertainment. We want to be more sophisticated around pricing so that we offer a range of price points and feature sets to suit consumers’ differing needs.
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