The streaming wars are reaching a fever pitch with more ads, higher prices, and greater competition as platforms scramble to reach profitability and capture paying users.
With so many choices now available to consumers, it seems like the media landscape is reverting back to the cable TV bundle of years past — the very thing that streaming set out to undo.
Retail giant Walmart (WMT) officially partnered with Paramount Global (PARA) to offer subscription services like Paramount+ to Walmart+ members, while YouTube TV (GOOGL) is reportedly set to launch an online channel store to compete with the likes of Roku (ROKU), Amazon (AMZN), and Apple (AAPL).
“It’s a natural phenomenon,” Raj Venkatesan, professor of Business Administration at University of Virginia’s Darden School of Business, told Yahoo Finance.
“Consumers do need convenience, and one place where they can look at all of their options, but where I think it will be different is the new players bring in more personalized services for consumers, which the old bundles did not provide,” the professor continued.
He explained that he expects the future of streaming to be “more searchable, more customized, and more personalized,” describing the changes within the streaming market as “a function of its own success.”
“Yes, it looks like we’re going back to the old times, but it’s in a different, probably better, way.”
Paramount’s upcoming Walmart partnership underscores a “survival of the fittest” mentality as streaming companies battle a more fickle consumer.
According to data from subscriber-measurement firm Antenna, cited by The Wall Street Journal, about 19% of subscribers to premium services — which includes Netflix (NFLX), Hulu, Apple TV+, HBO Max (WBD), among others — canceled three or more subscriptions in the two years up to June, compared to just 6% in the two-year period leading up to June 2020.
That increased churn, coupled with stalling growth in domestic markets, has contributed to big losses in recent quarters with Netflix shedding a whopping 1 million subscribers in Q2, while Peacock subscriptions remained flat.
As a result, platform stickiness (or how much time users spend on a platform) has become increasingly more important— highlighted by Walmart and Paramount’s latest collaboration, in addition to recent partnerships between streamers and wireless providers (Disney+/Verizon; T-Mobile/Paramount+; HBO Max/AT&T.)
“For all of the platforms, the main question is, ‘How can we show the value?’ ‘How can we get consumers to come back and spend more time on our platform, so that they see the value of the number of dollars that they’re spending every month?'” Venkatesan explained.
He added that he expects more streaming deals with consumer-facing businesses as platforms look to increase reach and lock in new audiences.
Ad-supported ‘here to stay’
To offset the subscriber slowdown (and buoy revenues), price hikes and ad-supported options have hit virtually every streaming-facing media company as Wall Street looks beyond subscriber counts and zones in on profitability and free cash flow.
Disney (DIS) and Netflix are the two latest platforms to hop on the ad-tier bandwagon. Apple TV+ is also rumored to be exploring an ad-option, while Warner Bros. Discovery revealed that it will have three tiers once the combined HBO Max, Discovery+ platform debuts next summer.
Disney revealed that the official launch date for its ad-supported offering will be December 8. It will cost consumers $7.99 a month — the same price as Disney+’s current ad-free plan before prices jump 38% to $10.99 in December.
The price of Hulu’s ad-free service will rise by $2 a month to $14.99 beginning October 10. Hulu with ads will go up by $1 to $7.99 a month.
Venkatesan surmised that “ad-supported is here to stay,” emphasizing the choice it provides to consumers, especially as the cost of subscribing to all of the ad-free streaming platforms begins to rival traditional cable TV packages.
Bank of America analyst Jessica Reif Ehrlich added that ad-tiers are also “a way for the traditional media companies [to] clawback some of the money that’s been lost to some of the digital companies,” explaining that advertising is “the bread and butter business” for most legacy media giants.
“They’ve been in advertising forever,” she reiterated, adding that ads “will help fund a lot of the content and a lot of the affordability for consumers.”
Still, Venkatesan cautioned that streamers must be creative when it comes to execution, emphasizing that innovation will be key.
“If platforms can get people to not see ads like an intrusion, and make the content more interactive, it might be a win-win for everybody,” he concluded.
Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at [email protected]
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