By Tam Williams, Contributing Analyst, Parks Associates
Streaming dominates video consumption but has entered a new era of slower growth and re-aggregation. Although the streaming market is maturing, it is by no means settled. US video viewers face a widening number of options for satisfying their video consumption. Consumers find themselves confronting a series of conflicting choices regarding content, pricing and service features before reaching a decision and even continue to seek additional services to enhance their TV experiences. In this dynamic environment, providers that accurately understand the motivations and preferences of differing buying groups and what triggers their purchases best stand to reach these consumers, convert them to subscribers, and retain them for extended periods.
Research firm Parks Associates finds half of all households subscribe to four or more OTT services, and 22% subscriber to 9 or more. The number of households with 4 or more subscriptions is stabilizing at around 50%, and extreme service stacking of 9 or more services is now the norm for one in five internet households. Consumers undoubtedly have more choices than ever, but the experience is becoming extremely fragmented. Managing nine or more distinct video subscriptions is a clear sign that the market is on the cusp of a major re-aggregation trend, with traditional service providers, device manufacturers, and other leading aggregators all competing to be the new main brand and navigation interface to the customer.
The adoption of virtual multi-channel cideo platform distributors (vMVPDs) continues upward in 2022; aggregation has newfound appeal. While vMVPD adoption grew only slightly in 2021, 2022’s rise in adoption underscores that consumer comfort with streaming is rising – even for online pay-TV services. This is in stark contrast to the decline of traditional and legacy pay-TV. Many consumers were initially attracted to vMVPDs by the promises of lower pricing and greater content freedom. Today, vMVPD price rises driven by the rising cost of content have all but eliminated many price advantages. Continued growth is a sign that consumers value vMVPDs’ flexibility as much as if not more than low pricing, and that an overload of content and service choices has now made an aggregated proposition more appealing to consumers.
Use of ad-supported OTT services is on the rise, but that growth is increasingly focused on a small number of top services. In 2022, the rising adoption of ad-supported services is increasingly being driven by a handful of services with particular advantages in content, ownership, bundling, and/or streaming platform integration. Samsung TV Plus benefits from integration into the world’s most popular smart TV platform. The Roku Channel is integrated into the popular Roku smart TV and streaming media player platform. Pluto TV is both popular based on its own merits as an early-mover, and also from deals such as pre-installation agreements with Verizon (home and mobile) and pre-integration with the Google TV platform. IMDb TV (Freevee) is pre-integrated into the Fire TV platform. These measures, along with original content, are proving to be differentiators for competitors in the ad-based OTT market. Consolidation over 2022 and 2023 is a possibility, given the fragmentation of the sector and the rising dominance of a small number of players.
In Q1 2022, established transactional VOD services either gained in use or mostly retained existing high usage. “Big Tech” companies’ transactional video-on-demand (TVOD) services continued to dominate the market, growing or maintaining usage among consumers. These services benefit from the power and presence of their parent companies’ service and device ecosystems: Amazon – Prime membership base, and Fire TV platform Prime Video integration; YouTube – preinstallation on many brands’ devices, and Android / Android TV / Google TV platform integration; iTunes – Apple device ecosystem integration; Google Play – Android / Android TV / Google TV platform integration; and Microsoft Movies & TV – Windows platform integration. Preinstallation or platform integration deals are thus potentially of strategic benefit to streaming services, but the growth shown by NBA League Pass, VUDU, and AMC Theaters On Demand also shows that standalone services with compelling or exclusive content offerings can also fare well within the TVOD market.
Parks Associates will present consumer research impacting the streaming video market and address key trends and topics affecting the video and connected entertainment industries during its annual Future of Video: OTT, Pay TV, and Digital Media conference. In its fifth year, Future of Video hosts virtual sessions throughout the year and will host in-person sessions in December.