The 15th edition of Deloitte’s media trends survey provides a fascinating snapshot of how US consumers have come to consume digital content in the wake of the coronavirus pandemic.
Entertainment categories are expanding – over the top (OTT) streaming video and music companies, video game developers, social media platforms and advertisers – all competing for the consumers’ attention, with a broad mix of free, freemium, ad-supported and subscription packages to suit different tastes and budgets.
Of those surveyed, 82% subscribe to paid video streaming services like Netflix, Disney+ or Amazon Prime Video (on average, four simultaneously). Around two-thirds (67%) also have a pay-tv subscription, while over half use an ad-supported streaming video service such as those offered by Hulu, Comcast (Peacock) or ViacomCBS.
Cost plays a crucial role in determining their choice of OTT video provider. Almost half of those polled by Deloitte (46%) reported that a low price was the single most crucial factor in deciding which paid streaming service they subscribed to, considerably ahead of content range (35%), applicability (33%) or exclusivity (32%).
Willingness to cancel or stop using a paid service was also closely linked to price – half (49%) also said they would cancel their OTT video subscription if the monthly fee increased. However, almost a third (31% in both cases) would cancel if their favourite content were removed, however, or switch to another provider if they offered more attractive films or TV shows or series.
Juggling customer churn and monetisation strategies
Constant customer churn is a particular problem for OTT providers, eroding the return on investment (ROI). They need to offset the billions of dollars spent producing exclusive content alongside the free trials, discounts and marketing they expend acquiring new subscribers. The challenge is to keep those subscribers on board after they have watched everything they want. Making it easier for them to find additional films and movies that pique their interest is one way to do that by offering an improved interface, search, and recommendation engines that improve viewer engagement and experience.
Monetisation imperatives apply equally to ad-supported services. Providers need to persuade consumers to accept varying amounts of advertising on their platforms then deliver marketing that is sufficiently compelling to influence sales. Deloitte found that 40% of US consumers who use streaming video services would pay US$12 a month for a service with no ads, while 39% preferred a free service with 12 minutes of ads per hour. However, the desire for no ads was markedly stronger amongst the younger Gen Z (48%) and Millennial (46%) age group. It is important for entertainment providers, digital platforms, and advertisers to understand the nuances between consumer segments and how much advertising is acceptable across different demographics.
The key questions that face video streaming companies go beyond how best to produce the hit movies and TV shows to bring paying customers onto their platforms. But in addition, they should be thinking about how to predict churn better, use membership perks to entice subscribers to stay, balance advertising revenue vis-a-vis subscription costs, and future proof the business by tailoring services to younger people. Partnering with mobile carriers may be able to address churn as it enables the video streaming companies to leverage the existing trusted consumer relationships between carriers and their subscribers. Payment partnerships with direct carrier billing also allow video streaming companies to reach consumer segments that may not have access to credit cards.
Gaming grabs a larger slice of entertainment eyeball
People of all generations only have so much time, attention and money to expend on multiple forms of entertainment. But the onset of coronavirus pandemic at the beginning of 2020 appears to driven more peoples into playing video games as a means of filling in time, connecting with friends, competing with opponents and relaxing within immersive action and storylines.
Over three quarters (78%) of those surveyed by Deloitte identified themselves as frequent or occasional gamers, and 45% subscribe to paid gaming services (such as Xbox Game Pass or PlayStation Now). Large numbers of Gen Z (87%), Millennial (83%) and Gen X (79%) said they play games on their smartphones, consoles and computers at least once a week. said they
But Deloitte believes it is Generation Z (those aged between 14 and 2024 (TYPO – should it be “14 and 24”?) born between 1997 and 2007) who now pose the most significant capacity for disruption. This is because they spend more time playing games than doing anything else. Over a quarter of those polled (26%) said this was their favourite activity, with only 10% opting for watching TV or movies at home.
The choice was close for US Millennials too (those aged between 25 and 38 born between 1983 and 1996). Just under a fifth (18%) ranked watching TV shows or movies at home as their favourite activity, only slightly more than the number who opted for playing video games (16%). More than half of both Gen Z and Millennial respondents also reported that video games had taken away time from other entertainment activities during lockdowns. A good example is how millennials enjoy trying new games on Roblox or watching expert players play their favourite video games on Twitch.
The dominant position that video holds amongst US consumer preferences will inevitably be challenged if the trends persist, even though 57% of respondents across all age categories currently rank it in their top three entertainment activities.
In other words, Generation Z may not be “video first”, concludes Deloitte, and media companies, games developers, advertisers and other firms operating in the entertainment space should be prepared to take a more diversified approach in the future.
Conducted by the Deloitte Center for Technology, Media and Telecommunications and fielded by an independent research company, the Digital media trends survey polled over 2,000 US consumers in February 2021.