Report: Streaming Services Need to Get More Creative to Increase Revenue; In-App Shopping Is Next Major Step
Streaming services are getting more expensive; there’s no getting around that. That, coupled with inflation, has customers becoming more frugal and actively reducing their subscription spending. Due to this, streaming services need to find other ways to ways to increase revenue outside of price hikes. Because of the economic headwinds, streaming services are having to figure out ways to continue to keep money coming in beyond the traditional subscription fees and advertising revenue.
According to MIDia Research, there are four distinct ways to for streamers to further monetize their content: digital merchandise, adaptive pricing, community, and shopping. These four new trends in monetization all fall outside of the conventional dichotomy between subscriptions and ads, but would not be unusual steps for the companies, since they are all well-established consumer behaviors in the other digital ecosystem. None will produce the same amount of income on their own as subscriptions and advertising do, but in conjunction with other methods, they have the potential to substantively increase revenue for streaming video-on-demand (SVOD) services.
Efforts to monetize through these methods are already underway for numerous streamers. In August, it was reported that Disney was looking into creating a membership program that could provide discounts or exclusive benefits to entice customers to spend more on its streaming services, amusement parks, resorts, and merchandise.
The program would resemble Amazon Prime, which charges a monthly or yearly fee in exchange for benefits like free shipping, discounts at Whole Foods, and a free streaming video service. Disney would wager that establishing a membership program, it could give customers incentives to buy more of the company’s goods and services while also learning a wealth of information about their preferences.
In November, the company took a step in that direction. As part of a trial period, domestic Disney+ subscribers would now have early access to Disney goods offered on shopDisney's online store. Products from “The Mandalorian,” “Black Panther: Wakanda Forever,” Pixar’s “Lightyear,” and Marvel’s “Doctor Strange in the Multiverse of Disorder” were among the merchandise available.
Amazon also has something similar in the works. The company demonstrated a new advertising tool, virtual product place (VPP), at the Interactive Advertising Bureau’s (IAB) NewFronts May. VPP is currently in beta, but it promises to allow advertisers to insert branded content into TV shows and films after they have been created.
VPP is being promoted by the business as a tool that will free showrunners and filmmakers from having to please brand partners during the production process, allowing them to concentrate on their creative vision instead. The technology enables billboards, signs, and other displays to show various messages over the course of the show’s run on the streamer. This will enable Amazon to incorporate various goods into episodes at various times and possibly even for various users.
Peacock also attended the NewFronts to showcase its own post-production advertising technology. The “Peacock In-Scene Ad” prototype system claims to locate crucial times in a program where more specific messaging can be inserted.
Free ad-support streaming TV (FAST) channels are also another avenue that services are using to further monetize their streaming libraries, as a record number of channels are launching to generate more revenue and combat subscriber churn. There are over 1,500 FAST channels currently available, and more are being added every day. Just last week, Roku added 11 new channels to its users, which include Screambox TV, a channel featuring horror and thriller content from AMC’s dedicated spooky streaming service and Dateline 24/7, which airs NBC’s iconic news magazine 24 hours per day.
FAST will certainly increase revenue for traditional media companies with large libraries, but digital consumers have a natural aversion to ads where ads will only be effective when strategically placed and within the right context, the MIDia report notes. Older demographics, that are more familiar and tolerant of the ad experience, will be the most likely addressable audience of FAST and the linear scheduling of legacy IP inherent in the model.
However, FAST may not have the staying power that some assume that it will. Media analyst Gavin Bridge predicted that “the present gold-rush phenomenon” might end within the next year or two in 2021. For example, new subscribers will only have the option of choosing between Peacock’s $4.99 ad-supported tier or its $9.99 ad-free plan since the company has recently removed the option for new users to join up for a free account.
In order to maintain their position in an increasingly competitive and volatile industry, streaming services will need to continue to innovate and find ways to maximize revenue, or the anticipated contraction — both in terms of services and contents — could be far larger than what many expect.