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Ad-supported streaming services are
the future of video consumption, finds the latest report by Parks Associates,
as OTT and traditional linear TV merge with the rise of FAST services.
article here
The white paper, “Optimizing
Video: Enhancing Content Performance for OTT Success,” also says that streaming is giving niche content
providers a platform to reach millions of consumers.
“As consumers continue to move away
from traditional pay TV services, they will first seek out options to watch the
content they want in ways they are accustomed to—a relaxed, lean back
experience,” says report author and Sr. Contributing Analyst, Parks Associates,
Thomas Schaeffer. “While most would say that they would prefer not to see ads,
many are willing to accept them in exchange for free or lower-priced options.”
Some 87% of US internet households
now subscribe to one or more streaming video services, and 20% subscribe to
eight or more OTT services, the report finds.
This represents substantial growth
compared to five years ago. However, competition is fierce. There are over 300
OTT video services in the US alone, in addition to thousands of FAST channels.
Content sellers and video services
are experimenting with new ways to attract and retain subscribers, as well as
introducing hybrid business models and partnerships.
Rise of Niche
Niche services, such as Shudder,
PokerGO and Curiosity Stream, are seeing a “significant opportunity” to compete
as consumers become less loyal to media brands when adding and removing
services to accommodate their viewing habits.
Recently, mainstream media
organizations have launched niche offerings. TelevisaUnivision’s ViX
Spanish-language service, for example, is currently distributed through a
variety of partners such as Prime Video, Roku, LG, DISH TV and SLING TV.
“Ad-supported streaming, particularly
FAST linear channels, can be used to distribute content that has relatively
limited audience appeal, and could never justify its own channel on traditional
broadcast or pay TV,” says Schaeffer.
Examples include Dogs 24/7 and Cats
24/7 on Pluto TV and NHRA (National Hot Rod Association) TV on Tubi and The
Roku Channel.
Per Parks: Advertising rates for
these niche channels are likely lower due to smaller audience size, but they
can allow content owners to generate some revenue rather than no revenue for
content that might otherwise languish in a vault somewhere.
Content continues to be a key driver
for subscriptions, with 48% of consumers referencing content availability as
the primary reason for subscribing to an additional service.
Further, it is content variety and
relevancy which Parks finds are the primary triggers for signing up for and
cancelling services — but price is now a much more significant factor.
“Except for Netflix and Prime Video,
consumers are likely to churn if the content library isn’t engaging or relevant
and prefer services that offer content across a wide range of genres,” writes
Schaeffer.
Elsewhere the report says that
outside of Netflix, which carries an average subscription length of 48 months,
nearly half of OTT subscribers are hopping from one service to the next
multiple times over a 12-month period.
With OTT video advertising expected
to reach $119 billion in 2023 much is at stake, with most of it riding on a
service’s ability to understand and predict viewer behavior and content
engagement.
Parks highlights the need for
subscriber engagement data as an increasingly valuable asset for media
organizations to assess, demonstrate, and predict the value of a service’s
catalog.
“The ability to validate content
performance enables content sellers and streaming services to buy and sell a
greater variety of licensed content, optimize pricing, and satisfy audience
demand.”
The report also forecasts that
subscription revenue for OTT services in the US will increase from $34 billion
in 2021 to over $46 billion in 2026.
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