By Loewe Tan
Driven by lockdowns and remote working, streaming viewership recorded a significant surge at the height of Covid-19. As the world continues to emerge from the constrictions of Covid-19, will the golden era of streaming continue to flourish?
In Asia, streaming view time grew by 90% in the second quarter of 2022, charting the largest growth in the world by region, according to Conviva, an online video analytics company. On the contrary, global streaming viewing time only increased by 14% in the same period. What could possibly be driving this sluggish global growth?
Netflix and unchill?
Orina Zhao, Senior Analyst of Ampere Analysis (Market Operators), told APB+, “The global streaming industry has reached a new stage. The streaming boom, which was partly driven by lockdowns and work from-home-policies during the earlier stages of the global pandemic, is receding.”
She cited the example of Netflix, which saw subscriptions decline in the first two quarters of 2022, with its performance in mature markets such as the US and UK hard hit.
According to Zhao, Netflix’s traditional model of revenue growth relying on price increases to support content investment, which in turn attracts paying subscribers, was becoming difficult to maintain in its most established markets.
She said, “The price hikes earlier in 2022, combined with worsening macro-economic environment and high inflation led to higher churn rates and stagnated growth in North America and many markets in Western Europe.
“In addition, Netflix’s high penetration and prevalent account sharing activities also mean that it might have touched a growth ceiling in many markets such as the US, UK, Canada and Australia.”
Ad-funded streaming
While the subscription video-on-demand (SVoD) model is seeing diminishing revenue, there is a significant shift in the business model for the streaming industry as more operators see the potential in the advertising video-on-demand (AVoD) model. Going back to Netflix, the streaming service launched a new ad-funded subscription tier on top of its existing three-pronged tier, using advertising to compensate for a cheaper price point.
Describing how advertisement will affect the competitive landscape, Zhao added, “Nearly all major global SVoDs, such as Netflix, HBO Max and Peacock, and many European broadcast video-on-demand (BVoD) service providers such as ITVX, RTL+ and Atresplayer, have launched hybrid business models with an ad-supported tier.
“The ad-funded tier is often aimed at reducing churn and finding new users by providing a cheaper price, but it also diversifies the revenue composition of the traditional subscription-dominated industry.
“Netflix is targeting US$50 - $60 CPM (cost per impression) with four or five minutes per hour of ad loads (advertisement). While Netflix said the ad-funded tier will provide a ‘neutral to positive’ contribution to its overall revenue, it opens up new inventory across streaming-only audiences and cord-cutters who had previously been difficult for advertisers to reach.”
Ampere Analysis predicts that the new ad-funded tier will help Netflix add about 10 million subscribers over baseline assumptions by 2027, and bring about $7 billion in revenue, albeit with some erosion of subscription revenue from Netflix’s basic tier.
Advertising, according to Zhao, will be a key theme for the streaming industry in the coming years.
Expect the unexpected
While agreeing that the streaming industry is under immense pressure to change, Graham Sharp, CEO of Broadcast Pix, is keen to highlight that the industry faces the growing demand for more high-quality video content.
Sharp elaborates, “The streaming industry should focus on providing simpler and better ways to create and produce professional-looking programming, without the need for expensive training and equipment.
“There is a need for live production equipment that is simple to install and easy to operate by anyone.”
Key to gain traction
Gautier Vandomme, Vice-President of Ateme (APAC), believes QoE (quality of experience) will be the key to gain greater viewers’ traction. He maintains that while great image quality — 4K and High Dynamic Range (HDR) — and reduced latency are part of QoE, they are not all that make up QoE.
Vandomme foresees three vital innovations in QoE:
- Hyper-personalisation: Instead of having to search for content, people should be able to receive content that best suits them. Or, they can choose a specific angle to watch and rewatch a particular moment in a sporting event. 5G infrastructures, in which many mobile operators have already invested in, is a perfect fit to bring hyper-personalisation to fruition.
- Immersive audio: Beyond what viewers see, what they hear is also vital in achieving top QoE. Surround sound is one example, and there are some interesting emerging trends, For example, viewers should be able to choose the volume of different audio tracks, for example, background noise versus commentary, eliminate one of the tracks altogether, or, choose the language they want to hear.
- Metaverse: The metaverse is expected to bring new experiences, enabling viewers to feel like they are right there at an event, for example, walking around the stage in a live concert, or strolling around the field during a game. Again, 5G infrastructures, with their edge architecture, is ideal to deploy such highly personalised and high-bandwidth experiences.
According to Vandomme, streaming service providers going forward will need to find new revenue sources such as targeted advertising and 5G-enabled experiences.
In light of the global inflation crisis and looming recession, Ampere Analysis’ Zhao concluded, “Streamers will become more conservative in content spending and selective in content acquisition and production. Content investment will flow to titles that are expected to carry lower risk and higher ROIs.
“Yet, despite cautious investment, Ampere estimates original spend from SVoDs will grow to $44 billion in 2027, accounting for 53% of all content spend from SVoDs.
“As part of the pressures to diversify appeal and control costs, SVoD services are also increasingly shifting to unscripted content and away from some of the high-cost drama series which dominated earlier slates.”
So the future of streaming remains unscripted?