Digital Déjà Vu: Streaming's Shift Back to Ad Revenue and Big Network Dynamics

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In the relentless pursuit of profitability, content owners are grappling with the challenge of monetizing streaming channels, with some contemplating launching their own in today's fiercely competitive landscape. But it's a tough squeeze. 83% of American households already use streaming services, with thousands to select from. Too many people already compete in this space with insufficient revenue to support all participants

As a result, the industry is consolidating as companies struggle to compensate for the loss of audience and revenue experienced in traditional linear media. Subscription models are proving less effective than anticipated, with a declining number of services effectively enticing customers to engage in long-term, annual memberships.

Watch This Space

Industry analysis determines that a dramatic restructuring in the media business is underway, with only a couple of streaming services really profiting right now. The rest are trying to figure out how to aggregate enough eyeballs to make it worthwhile.

Further industry analysis indicates competitors are going to have to learn to partner strategically to survive. The pie, it seems, is simply not big enough for the number of slices that are currently being taken.

Subscription Fatigue

What viewers are willing to pay for is another key force shaping the streaming industry, with consumers increasingly hitting “subscription fatigue” and actively looking to reduce costs. 

Consumers subscribing to three+ services is down by 14% year over year, and just 27% of subscribers are saying they plan to sign up for a new plan anytime soon. And those considering signing up for a new service often swap one platform for another. The pie isn’t getting any bigger; it’s just being sliced up differently, and these little slices don’t bring in enough subscription revenue to keep the lights on.

Many consumers say they’ve changed their subscriptions due to rising costs and economic conditions, canceling a paid service or switching to a lower-cost, ad-supported, or free version. And for subscription services, the pie might actually be shrinking.

Where We've Come From

Originally, to entice consumers to switch from cable to streaming services, providers focused on minimizing obstacles and reducing friction. This approach involved addressing common grievances associated with cable TV, such as the requirement for customers to commit to high-cost annual or multi-year contracts. 

But people have gotten savvy about juggling between lower-cost streaming services. When their favorite show goes off a platform, many just turn it off. Some subscribe to another streamer. Others look for free, ad-supported options. Building a sustainable subscription business model is tough when customers are comfortable starting and stopping on a whim.

Coming Full Circle

It’s funny; we appear to be going back to the original television model—a handful of well-known brands that dominate the "airwaves".  

Given the choice, only 27% of consumers would prefer a subscription without ads. 40% say they prefer free services funded by ads. While linear broadcast channels have lost significant viewers, consumers like the idea of free and are more than willing to consume ads rather than pay directly for content. 

Free content supported by ads. The more things change, the more they stay the same. 

The Return of Brand?

Eventually, brand might become important again. Back in the day, people knew exactly what network aired their favorite shows—and the day and time they aired! Most people today have trouble recalling who originally aired their favorite shows or even what platform they watched it on (even if it was a streamer's original production) because content shifts so much between streaming services. Maintaining loyal audiences going forward may hinge on building brand loyalty.  

It’s history repeating itself. 

In the beginning, there were just three networks. And now we look likely to move back to something similar. 

Flexibility is Key

The reality is that, at least for now, the industry is coming full circle to where much of the business model will have to be ad-supported to compete. Even the big-name streaming services that claimed they would never adopt that model now are. If you buy and sell content, you now require a solution that can store and track information at a granular level to enable you to monetize it via subscription, Ad Sales, or some middle-ground compromise. If you have a legacy, hard-coded, stagnant system, effectively monetizing content will become increasingly difficult. FilmTrack offers the required granularity and flexibility, allowing you to adapt to the industry's demands in real-time.

FilmTrack Helps You Evolve Seamlessly

With expertise in navigating the complexities of financial transactions and rights management, FilmTrack is ideally positioned to help you adapt to the dynamic demands of the market, ensure equitable financial arrangements, and maximize the value of your assets. Our team is eager to show you how we can help - reach out to learn more!

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This article is for general information and education only. It is provided as a courtesy to the clients and  friends of FilmTrack. FilmTrack does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy  or change. This article may not be reproduced, distributed or further published by any person without the written consent of FilmTrack. Please cite source when quoting.

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