Streaming Needs to Worry About a Global Recession…But Perhaps Not as Much as Cable

Last week MIDiA’s Mark Mulligan overviewed how, in a recession, discretionary expenditures are the first to be cut. Given the non-obligatory nature of subscriptions and the contractual shackles of cable, services like Netflix and Spotify would likely lose out quickly as consumers rush to minimise their spending.

It is a difficult time to be unsure in the market, for anyone. A growing body of economists claim that a global recession is on its way, and given the economic uncertainty being exacerbated by current global socio-political tension it does not  take an expert to imagine why that might be the case.

However, this is barely the tip of the iceberg. The market, still buoyant as it is, operates in what is now a completely saturated attention economy. Consumers’ available time and spend is already at maximum capacity, and entertainment propositions are now competing for time (and money) which is frequently already being allocated elsewhere. Lack of adoption means actively losing to the competition.

When, however, that available wallet share decreases because of a global recession, the already-competitive, entirely discretionary digital marketplace will look less like the land of bounty it appeared pre-peak and more like a post-industrial wasteland. The pickings will be slim, and the competition will transition from reluctantly friendly to openly cutthroat.

Who, however, should be most worried? Mulligan argues that cable subscriptions, due to the expense involved with early cancellations, will likely survive the onset of the recession and could in fact experience a reprieve as the completely non-obligatory subscription services are cancelled instead the moment money gets tight.

However, it is worth giving greater consideration to one of the critical evolutions in the market – one which has not made as big of a difference from a revenue perspective, but which is all-but-critical for the consumer: freedom of choice. Not only has this already come into play with the rise of savvy subscription switching, but it will likely make the distinctive case for survival come tougher times.

Recessions are stressful. What else is stressful? Spending two hours on hold with your cable provider trying to cancel your overpriced contract when you are already over-budget and being told it will cost you more to terminate than keep it on.

Once, consumers may have accepted such entrapment as a necessary evil to continue media consumption on the whole. When sat listening to elevator music and the internal sounds of one’s own frustration, however, well aware that two clicks away the cheaper, more flexible, low-stress, multi-device, content-heavy subscription video service is the alternative to the already-irrelevant inconvenience that is a cable subscription, how many consumers are really going to spring for another contract?

Sure, those already stuck might resign themselves to the situation – but those with any way out will be gone the moment they are able to do so. Those among the majority of global consumers who have already begun cord-shaving will not be coming back.

Sure, subscriptions will likely also take a hit – but their losses will not be permanent, as they are just as easily re-started as cancelled. Perhaps one month money is a bit too tight to afford Netflix, but in the next (after that cable contract is finally over, perhaps? Or in the summer, where the gas bill is not so high?) it is two clicks and then you are back to binging Friends to forget your economic woes.

To be fair, the competition will be incredibly fierce. Already the prospect of requiring multiple additive subscriptions to have access to all the content you want is threatening to consumer wallets; in a recession, the likelihood that they will stack subscriptions is far lower. For this reason, the tech-major, all-inclusive propositions which have the best value for money will likely win out – but there is hope for those which can carve out their niches and price points and hunker down to outlast the recession. Those that can make it out the other side, audiences intact, may even have earned more consumer loyalty than currently exists now.