April 30, 2021
What no one in streaming services is talking about — but should
It’s time for streaming services providers to use the lessons learned from 2020 to redefine the direct-to-consumer experience.
Streaming services providers are at a strange intersection in 2021: While the clamor for direct-to-consumer (DTC) content is at an all-time high, profits often remain elusive. The reason: Streaming providers aren’t focused on the right initiatives.
Make no mistake that there’s plenty of good news in streaming. The market grew 37% in 2020 amid the global pandemic. Splashy debuts by new services such as NBCU Peacock and HBO Max grabbed extensive media coverage. According to Digital TV Research, the five largest US-based streamers — Netflix, Disney+, Amazon Prime Video, Apple TV+ and HBO Max — will reach a collective 678 million subscribers by 2025. With the rollout of 5G, mobile devices will be able to achieve speeds of 10 gigabits per second.
Behind the good news, however, are unspoken truths. Disney+ is responsible for much of 2020’s market growth, and Netflix’s subscriber base easily outdistances its nearest rivals, hitting the 200 million mark in January. Equally disconcerting, Netflix’s recent quarterly results show that even the streaming giant isn’t immune to the sector’s challenges and subscriber slowdown.
Revenue alone isn’t enough for streaming providers. Services also have to be profitable. Even leading advertising-based video on demand (AVOD) service providers have trouble with falling average revenue per user (ARPU) and low conversions of signups into active users.
Four conversations worth having
To realize profits, providers will need to address some of the hard topics in DTC streaming services. 2021 is the year to launch these conversations — and get it right. Here are four topics that should be top of mind for all content providers:
- Content and distribution shouldn’t be a leap of faith. Media supply chains have traditionally been built to serve older linear distribution models. Yet agility and range are the tenets of today’s viewership. For this reason, the shift to DTC needs to be a structured exercise that enables a transition to new models while still serving traditional ones. Does your organization have the ability to scale and grow, and can you accommodate increased consumption, users and loads? How efficient is your multi-platform packaging and fulfillment across linear and video on demand (VoD) and over-the-top (OTT) channels?
As content investments continue to increase, it’s equally important to expand monetization opportunities with an eye toward rights compliance. With content being distributed across multiple endpoints, distribution platforms and territories, a key question for every media company is whether their system can address that complexity and utilize content efficiently with zero risk of noncompliance.
Most media companies are sitting on huge libraries of content that they haven’t begun yet to tap. What needs to be discussed are the stickier issues, such as:
- Legal and compliance risks that arise from expired rights
- Real-time updates unavailable during negotiations
- Unutilized value of content due to rights expiration
- Manual updates and error-prone processes
When it comes to monetization, international distribution provides further scale and reach. But managing global rights and distribution is substantially different from standard rights management, and streaming services providers need to adapt to each territory’s royalties, rights and commissions. For example, existing contracts may already be in place for original content in international territories.
- Just because you build it doesn’t mean they’ll come. Every streaming service has an app, but subscriber experience is the make-or-break factor, especially as the “personalize everything” youth of Generation Z come of age. If you build it, they won’t necessarily come – or keep coming back.
For OTT product and customer experience teams, the top experience-related pain points include user journey and navigation discord. Most teams also struggle with poor search experience and results, as well as limited content choices.
There are two ways to differentiate experience. One is by generating content or marketing recommendations that hit the viewer’s sweet spot. This requires leveraging the full range of data and AI — across user preferences, consumer profiles and the user journey — to offer the experiences that lead to customer stickiness.
For example, some of the streaming service providers we work with have increased viewership through marketing campaigns that put analytics to work, derived from parameters such as viewing behavior, consumption patterns and usage. We can also leverage data with evolutionary AI algorithms and frameworks to enable hyper-personalization of subscriber experience.
The other way to differentiate is by using automation to make the experience seamless. Data is also at the heart of this approach, which envisions personalized user interfaces, carousels and asset presentations based on individual preferences and customer journey maps. We’re now working to offer streaming service providers proofs of concept to automate experience validation as well as benchmark search and recommendations effectiveness.
- Measure the right stuff. We see many media service providers treat quality of service as table stakes rather than making it a differentiator. Many still rely on reactive metrics, such as how quickly a service issue was resolved. Few explore the role that an intelligent, holistic system — with an integrated view across applications, user behavior, devices and the network — can play to prevent quality issues from occurring in the first place.
Yet, letting the status quo continue is risky. By not shifting their metrics, media service providers remain vulnerable to customer complaints that escalate into viewer abandonment and negative social media comments. The hard question is how to proactively measure and take corrective action before this occurs. The answer requires transitioning from manual, reactive processes to systems that combine advanced data sources, artificial intelligence/machine learning-based intelligence and automated operations.
Along with our partner ecosystem, we can help streaming service providers start thinking beyond metrics that answer the “what” (buffering, pixilation and lags) and extend into the “why” (application vs. device vs. infrastructure), “where” (region, geography) and “how” (next-best action).
- Monetization is all about the data. To increase the effectiveness of content and promotional campaigns, providers need to leverage audience segmentation and share the right content with the right audience on the right platforms. But data is the oil that runs the DTC engine, and many streaming services providers overlook the question of how effectively they’re leveraging it to enable segmentation.
While data drives the metrics that matter most — including customer lifetime value, ARPU and subscriber retention rate — media service providers typically take a myopic view of data. By allowing it to remain in functional siloes such as product, marketing and promotions, they wind up with monetization gaps that a unified view of the customer would help close.
What steps do media organizations need to get right with regard to a unified customer view?
First, collect, clean and structure data from catalogs and media assets, as well as devices and platforms, in one place. Next, to get a 360-degree customer view, aggregate user information that’s privacy-compliant and also enriched by first- and third-party data, including customer identity and household relationships, as well as lifestyle indicators and social media. With cloud-based advanced analytics and data science, you can then put this unified view to multiple downstream uses, such as customer profiling and segmentation, next-best offer and free trial-to-paid subscriber conversion.
2020 was a year to remember for streaming services providers and media consumers, alike. Now, it’s time for providers to implement key lessons from the past year to keep redefining the user experience across devices, platforms and content ecosystems. By doing so, they can make 2021 a transformational year in which they successfully navigate the way forward.