Finding the third way for video monetisation

2023 is an inflection point for streaming video; no longer young (Netflix pivoted into subscription video on demand (SVOD) back in 2007), no longer novel (monthly video subscriptions went mainstream in the major English speaking markets in Q4 2019 (Source: MIDiA Research quarterly consumer surveys)), and no longer the preserve of the young (55+’s became the largest binge-viewing demographic in major English speaking markets in Q1 2020). This has all happened as the market transitioned into a period of high inflation and where the global economy is operating on a knife edge between sustained growth and prolonged recession – both feasible outcomes in 2023. As a result, consumers are cautious with their discretionary spending and show early signs of reining in their subscription budgets (The number of subscribers in major English speaking markets who subscribe to more than one video subscription fell for the first time between Q3 2022 and Q4 2022).

FAST offers a partial solution

In this tense and highly competitive consumer landscape, free ad-supported streaming TV (FAST) is being presented to blunt the rising threat of subscriber churn. While FAST will undoubtedly generate incremental revenue for traditional media majors with deep libraries, it still comes up against the inherent ad resistance of digital consumers. A whole generation has grown into bill payers on the back of ad-free subscription video. For them, ads will only work in context and through innovative deployment. Older demographics, that are more familiar and tolerant of the ad experience, will be the likely addressable audience of FAST and the linear scheduling of legacy IP inherent in the model.

Third way monetisation will deliver optimal engagement and post-subscription revenue

As MIDiA identified in TV Monetisation | The third way, another way to monetise what is now an inherently digital TV consumer experience is through digital merchandise, adaptive pricing, community, and shopping (D.A.C.S.). These four emerging monetisation trends are all outside of the traditional binary world of subscription versus advertising. Crucially, they are all established consumer behaviours in the digital ecosystem and they deliver an enhanced consumer experience for a streaming TV audience. None by themselves will equal the share of revenues generated by subscriptions and advertising. However, collectively they will deliver incremental revenue growth for SVOD.In an era where TV is now a digital product competing against all other forms of digital entertainment, streaming TV must work harder to keep its audience and build engagement with digitally native audiences going forwards. The alternative is the slow erosion of revenues, and relevance, as alternative entertainment formats deliver the 21st-century experiences increasingly expected by digital natives. Streaming TV’s moment to act is here.