Consumers are becoming more and more ruthless with their subscription decisions. Experts say some streamers may not survive the trend.
The dreaded words "recession" and "retraction" were used early. The phrases "challenging trends" and "canary in the coal mine" were uttered with thinned lips and furrowed brows. "This is not going to be the cheeriest of sessions," confirmed Mark Mulligan in his opening remarks.
It was already an incredibly bleak beginning to a research presentation. Then, Mulligan said: "What we're going to be talking about is … a period of uncertainty over a number of months and years."
Covid. Inflation. Supply chains. The war in Ukraine. The cost of living crisis. Tasty cheese. Petrol. He could have been talking about any industry that's getting squeezed in 2022. Instead, the Midia Research managing director and the rest of his team were beaming out live on YouTube to discuss something far closer to my heart.
Streaming. Not just television, the thing we all used to numb our brains and pass the time during Covid lockdowns, but music, podcasts, audiobooks, gaming… anything that provides some form of online entertainment.
Netflix lost two million subscribers last quarter. Photo / 123RF
At The Attention Recession webinar, five experts argued that a glut of streaming options during lockdown have led us into a big pool of digital gloop. Those businesses — from Netflix to YouTube, Apple Music to Spotify, as well as podcast platforms and gaming subscriptions — are competing for an increasingly savvy market looking to cut costs.
Surely, they can't all survive.
"We hit peak when the pandemic hit," declared Mulligan. "People sat at home with cash in their pockets and time on their hands. We saw a surge in entertainment that didn't require you to go anywhere."
This, he said, created an "artificial boom". Now, as Covid-19 restrictions end, people go back to work, cafes and restaurants re-populate, and borders open back up, that boom is subsiding again. Midia's research makes a very strong case that streamers across many formats have maxed out their audiences.
And the time when consumers would subscribe religiously to one service and never change it is over. Instead, "savvy switchers" are on the rise, those that spend a month on one streaming service, bingeing everything they want, then switching to another. That means Netflix one month, Apple TV+ the next, then Disney+ and so on.
As Netflix proved when it announced it would lose two million subscribers this quarter, sending its stock price plummeting, market domination is no longer a given.
For TV, the research (which was conducted in the US, UK, Australia and Canada, but it's fair to say there are common threads in Aotearoa) shows Netflix and co have found their ceiling. They're no longer competing for new users, but instead trying to persuade customers to switch services.
Half of all consumers already have one TV streaming subscription. Mark's brother Tim Mulligan, head of Midia's online video research, says that's about as big as it's going to get. "The takeaway here is we're reaching organic limits of video subscription services … there's a finite number of subscriptions people are willing to tolerate."
So what's happening now? If you've ever dropped one TV streaming service to pick up another, you're already a savvy switcher. More and more people are doing this – it's a sign that consumers are getting smarter with their entertainment options to save dollars and get more bang for their buck.
They're also over searching for stuff. Tim Mulligan believes Netflix's lack of quality control is an issue. "There's more content than there's ever been in the history of content," says Tim. "If you don't have a layered, curated experience [customers will go somewhere else]."
But it's not just other TV streaming services customers are moving to. If there's one common theme that came through Midia's research, it's that online entertainment options are all mixed up. TV services aren't just battling other streamers, they're in competition for ears and eyeballs with music, podcasts, audiobooks, and, increasingly, gaming subscription services.
Spotify has a safer place in the market as you don't often need two music streamers. Photo / 123RF
As inflation and the cost of living continues to rise, customers are running a leaner, meaner subscription operation. "If we've got 10 per cent inflation, and someone has 10 subscriptions, someone has to ditch one of those subscriptions to have the same standard of living in 12 months' time," says Tim Mulligan. "That's the first time that's happened in the digital economy."
How will that play out in music? With just two major players in Apple and Spotify, things are likely to be more stable than in the ultra-competitive TV market. Mark Mulligan believes more customers might switch to Spotify's free, ad-supported streaming service to save money.
Yet customers are unlikely to bow out of music completely because "music is a cheaper product … and you only need one of them".
As many gamers already know, the best value for money could lie in video game subscription services. Playstation Plus and Xbox Live subscription packages offer gamers hundreds of hours of interactive content across dozens of titles for the same price as Netflix. They're also newer services "in a more favourable stage of the adoption cycle" says analyst Karol Severin, who believes more are cottoning on to this than ever.
What does all this add up to? Cultural trends analyst Hanna Kahlert says the short-term outlook isn't good. "The artificial boom period is coming to an end," she warns. Add in the cost of living crisis, and some streaming services aren't going to last. Locally, that could be good news for free services like TVNZ OnDemand and Three Now, both of which offer quality local content and varying selections of overseas shows, all for just your email address.
Paid services are going to have the problems. Savvy switchers aren't going away. Younger consumers are already accustomed to "stop-start, all-or-nothing behaviour" says Kahlert. They may even get better at it, and start teaching their parents how to do it. "Those habits are there to stay."
That's good news for wallets, but bad news for streaming services, who are going to need to find ways to offer better value for money, and more reasons for subscribers to stick around, or they simply won't last.
