The streaming industry is undergoing a significant transformation, grappling with evolving consumer expectations, increasing production costs, and the growing demand for more affordable and personalized viewing options. Consumers are reducing their subscriptions due to economic pressures and dissatisfaction with subscription fatigue and difficulties in content discovery.
Geir Skaaden, chief products and services officer at Xperi, provides insights into how providers can overcome these challenges. His suggestions include offering bundled services, implementing ad-supported models, and enhancing user experiences. This advice aligns with the latest TiVo Video Trends Report, which highlights a notable shift in consumer behavior, including a significant rise in the adoption of ad-supported streaming services (now favored by 64% of consumers—a 16-point increase year-over-year).
One significant challenge is the worsening content discovery problem. The TiVo Video Trends Report indicates that 73% of consumers utilize multiple apps per viewing session (up from 60% the previous year), with reported dissatisfaction in recommendations regardless of the source. This necessitates smart TV manufacturers to either create custom operating systems or acquire third-party solutions to optimize the user experience.
Our research indicates that a substantial 77.8% of consumers are at least tolerant of advertisements. Ad tolerance surprisingly correlates inversely with age, with younger demographics showing increased tolerance. Simultaneously, higher-income respondents also exhibit greater ad tolerance.
Streaming platforms possess a unique advantage in offering contextual advertising – ads relevant to the viewed content. This presents an opportunity to implement more relevant, targeted ads, minimizing user friction compared to traditional television. This approach can make streaming more appealing to consumers. Understanding and responding to consumer preferences will be crucial for the industry's ongoing growth.
The industry also faces rising production and content acquisition costs, impacting profitability. Consumers are responding to higher prices with subscription fatigue and churn. Bundled services and ad-supported models can alleviate these issues by offering cost-effective options and generating additional revenue.
By emphasizing targeted advertising and creating positive user experiences, streaming providers can reduce costs and enhance profitability, benefiting both consumers and the industry. Customer retention is paramount, as acquiring new customers is expensive. Balancing subscription fatigue and the demand for diverse content is crucial.
Addressing subscription fatigue necessitates resolving underlying issues: subscriptions not meeting user needs and irrelevant recommendations. Bundled services are emerging as a solution, offering customization and personalization to combat fatigue and reduce churn. The TiVo VTR found that 61.7% of respondents considering switching broadband providers were more likely to stay if additional streaming services were bundled.
Bundles offer better choice, pricing flexibility, and overall higher value. This addresses consumer needs and ensures satisfaction. Some companies subsidize these bundles, creating a more engaging service. We anticipate more tailored bundle options, blending free, ad-supported content with premium subscriptions, catering to diverse household preferences.
While utilizing smart TV advertising potential is important, it shouldn't compromise the user experience. The user experience should always be the priority. With shorter attention spans, providers must quickly engage viewers. Focusing on a positive user experience enhances satisfaction and reduces churn.
Platform operators should prioritize user experience while managing advertising. Improving search and recommendation is key. Instead of irrelevant ads, smart TVs can prioritize relevant sponsored content, but this must be done judiciously.
Although many consumers tolerate ads, many smart TV interfaces prioritize irrelevant ones, hindering the user experience. Xperi's TiVo One addresses this by combining ad inventory across multiple devices, enabling efficient campaign optimization while ensuring a seamless user experience for consumers.
This approach effectively monetizes content. Ad-tiers provide differently priced offerings, catering to various household budgets. The streaming market is poised for substantial global growth, with a shift away from traditional media dominance and the rise of big tech players like Amazon, Google, and Apple.
Streaming providers who prioritize consumer choice and actively listen to their needs will thrive in this dynamic ecosystem.