NAB Show
Netflix’s decision to cancel high profile
drama 1899 after just one season came as a shock to fans and a
reality check to content producers that streaming shows will be cut to a
different cloth from now on.
article here
Just as consumers don’t have an
endless budget to subscribe to streaming services, so content providers are no
longer willing to open the checkbook if the numbers don’t add up.
And those numbers have changed along
with the way success is measured.
“The enthusiasm for streaming among consumers is
still there, but I think the assumption that all these platforms are going to
continue to grow and add subscribers every quarter is gone,” Hub Entertainment
Research founder Jon Giegengack told Lucas
Manfredi at The Wrap.
“I’m not entirely sure why people thought it would go on forever, but we’ve
reached the point where that’s not guaranteed.”
Netflix’s first subscriber loss in
over a decade last April caused a shock wave that sent streamers back to the
drawing board. Revised strategies include a shift of focus from pure subscriber
growth to profitability and average revenue per user.
“Ultimately, companies need to generate cash so
that they can pay the bills and not go bankrupt,” David Offenberg, an associate
professor of finance at Loyola Marymount University, told The Wrap.
“I think the focus will be on ARPU for the rest of eternity at this point.
We’re done with focusing on subscribers. And if you’re not at scale yet, your
chances of getting there are pretty slim.”
Netflix was the first to alter course and has succeeded in leading the competition on ARPU. Figures in the article show Netflix has an ARPU of $16.37 in the US and Canada, followed by Hulu’s ARPU of $12.23 and Warner Bros. Discovery of $10.66. Disney+ has lagged behind its rivals with a domestic ARPU of just $6.10.
Another universal tactic is to adopt
different pricing tiers with many streamers introducing a free or lower cost
ad-supported option.
Additionally, many streamers are
increasingly leveraging bundled services. The average household has 12.5
different entertainment sources that they consume, according to an October 2022
Hub Entertainment survey of 3,000 TV consumers. These sources include streaming
TV, social media, gaming, music, sports, podcasts, audiobooks and reading.Cr: Parrot Analytics
Companies that are able to
super-aggregate these services into bundles will have an edge, Manfredi
maintains. Notable examples of super bundles include Amazon Prime, which offers
benefits like access to Prime Video content and free delivery on Amazon
purchases, and Apple One, which includes AppleTV+, iCloud storage, Apple News,
Apple Music, Apple Arcade and AppleFitness+.
The cancellation of major shows like 1899 is
far from unique and speaks to the fact that streamers can no longer afford to
have an endless library of shows and movies
“As profitability and ARPU take
center stage moving forward, streamers have learned that they will need to be
more mindful about their content spend and what that investment is going towards,”
says Manfredi.
1899 was
an expensive show to produce and required an entirely new and unique virtual
production volume to be built in Berlin. Likewise, the multimillion-dollar
deals that have been awarded to show creators like Ryan Murphy, Shonda Rhimes
and Rian Johnson, “are a thing of the past,” according to Morning Consult
entertainment and media analyst Kevin Tran.
“Streamers need to make better use of
the intellectual property they already own while also keeping in mind moving
forward that sheer quantity of content is now far from a compelling
differentiation factor,” he says.
On the flip side, Tran warns that
pulling content could make showrunners and actors “more hesitant to work with a
company that they view as too eager to axe pricey or declining shows from their
streaming platforms” and potentially anger fans of those shows.
Manfredi also thinks that the days of binge viewing
are largely over. It makes more sense for streamers to drop episodes,
especially of its most popular content, over a period of months to eke out
subscriber engagement. Netflix’s two-part release of Stranger Things S4
last year was a case in point.
“If people can binge watch a whole
show and then drop their subscription until the next season comes out, that’s a
pretty tough calculation if you have to come up with a brand new, super
expensive show to reengage them every time,” Giegengack said. “If you parse
those shows out and the episodes come out once a week, or maybe starting with
two like they do on Paramount+ to get people hooked, and then parse them out
further apart after that, each piece of content that you’re investing with can
keep people engaged for a longer period of time.”
Churn is still a huge issue for all
streamers. In the third quarter of 2022, cancellations across Netflix, Hulu,
AppleTV+, Disney+, Discovery+, HBO Max, Paramount+, Peacock, Showtime and Starz
grew to 32 million, according to Antenna. The figure represents a “significant
expansion” from 28 million cancellations in the previous quarter and 25.2
million cancellations in the same quarter a year ago.
In a bid to counter churn, Manfredi
detects a new urgency around commissioning franchises. One poll suggests 75% of
people are likely to cycle subscriptions in the next six months with the main
stated reason being that there was only one title on a given streamer that they
were interested in viewing.
“A reliable way to retain subscribers is to
keep them connected to things that they know and love,” Lionsgate Television
Group vice chairman Sandra Stern told The Wrap. “I think for
streamers particularly that is a really major objective.”
Disney+ has mastered this strategy with regular
output of new Marvel Studios shows such as Loki and She-Hulk:
Attorney at Law and new Star Wars series like Andor.
Netflix has scored success with Wednesday and Paramount+
continues to earn mileage from Yellowstone spinoffs. Look out
for Peacock’s John Wick universe spinoff later this year.
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