'Subscription Overload' a Concern in Competitive OTT, Parks Event Told
Nearly half of U.S. broadband homes subscribe to four or more over-the-top video services, with streaming now the primary way consumers view TV content, said Parks Associates analyst Paul Erickson on a Thursday Future of Video webcast. But service stacking is starting to slow, as viewing bumps up against an “inevitable point of subscription overload from having a finite amount of time and budget to spend on watching video,” Erickson said.
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Consumers are becoming more discriminating and intentional about what they subscribe to, Erickson said. Amazon Prime Video, Netflix and Hulu, the top three OTT services, were dominant before the COVID-19 pandemic, but Parks now sees strong growth beyond the big three, including a number of households subscribing exclusively outside those services, he said. That means media companies’ distribution strategies need to be flexible to “meet consumers where they are,” he said.
As of Q3, a third of broadband households, 34 million, watched ad-supported VOD services, a “diverse and competitive” segment of the market that’s “here to stay,” Erickson said. Growth in AVOD services is spurring heavy content investment, alliances and pre-installed platform deals on smart TV platforms from Samsung, LG, Roku, Google, Amazon and Vizio, he said. Erickson cited a Tubi forecast projecting the number of AVOD services will surpass the number of subscription VOD services by year-end.
The primary operating system platforms in smart TVs last year were Samsung’s Tizen, LG webOS and Roku TV, which together have 70% of smart TVs, led by Samsung’s at 42%, said Erickson. Despite their dominance, services and providers need to support a broad range of OS platforms to extend their reach in a highly competitive market, Erickson said. “This picture is only going to get more competitive,” he said, citing the addition of Comcast’s XClass TVs in the platform race, Google’s stronger push with Google TV and Hisense’s Vidaa coming to the U.S. market this year.
Smart TVs are in use in 55% of U.S. homes and are the most favored device for streaming video at home, Erickson said. They also have the most balanced viewing usage spread out among MVPD services, SVOD and AVOD, Erickson said. Individually, set-top boxes get the most usage for MVPD video, streaming media players for SVOD and AVOD consumption, and consoles and smartphones for YouTube and Twitch, he said. Some 72% of survey respondents reported using multiple hardware platforms to consume video, suggesting any successful video distribution strategy “must be multiplatform” from inception, he said.
About 36% of over-the-top video subscribers, 32 million, switched between services and resubscribed in the previous 12 months, Parks said. Not being able to find content and running out of things to watch are two of the top reasons for leaving a service, Erickson said. “Content is the primary catalyst on both sides of the subscriber journey,” he said. Data collection and analysis can help services identify subscribers at risk of churn and tag the service hoppers likely to “jump in and out of services no matter what, so that providers do not waste resources chasing them in vain,” said Parks President Elizabeth Parks.
Subscribers interact with OTT services in diverse ways, Parks said. The proportion of users who subscribe directly to an OTT provider is declining, dropping to 29% in 2021's Q3 from 41% in Q1 2020, she said. Last year, a “substantial” number of OTT households subscribed to an OTT service via Amazon Prime Video Channels, but that was expected to change after HBO and HBO Max were removed from Amazon Prime in September, Parks said. Disney+ isn’t available through major aggregators, and NBC recently announced it's moving many of its shows exclusively to Peacock and away from Hulu, she said.