The OTT streaming push for new content diversifies

January 31, 2022

The OTT streaming push for new content diversifies
Jonathan Bennett, Chief Commercial Officer

Jonathan Bennett

Chief Commercial Officer

An in the video streaming space in the last couple of years highlights both the ferocity of the competition and the scale of the investment needed to keep consumers hooked. Services require an endless conveyor belt of new content; be it films and shows or even live television.

HBO Max managed to grow its global subscriber base by almost 22% year on year to 73.8m in 2021. That figure was up 8% on the third quarter of last year when numbers declined after being removed from Amazon’s Prime Channels. Most of the HBO Max subscriber base (63%) are in the US. Still, international subscriptions (27m) have expanded faster after the company made the service available in an additional 46 countries worldwide in 2021.

Parent company WarnerMedia announced in December 2020 that all 17 films scheduled for release by Warner Bros in 2021 would debut simultaneously in cinemas and on HBO Max. Segments of the film industry widely criticized the tactic at the time, but its success helped WarnerMedia chief executive Jason Kilar vindicate the decision. Subsequent consumer appetite for blockbuster movies, including Dune and The Matrix, alongside the third season of the TV series Succession and The Sex Lives of College Girls, undoubtedly contributed to the platform’s growth.[i]

Peacock vows to convert AVOD subscribers into paying customers

Comcast only launched its streaming service and app Peacock in July 2020, and the company has remained tight-lipped on its subscriber numbers up until now. That changed in its latest fourth-quarter earnings announcement when executives revealed 24.5m monthly active accounts, up from 20m in July 2021.[ii] Of those, 9m are paying subscribers. In comparison, 7m are members that receive a bundled version of its Premium version for free through Comcast’s own Xfinity broadband services and other distributors such as Cox Cable.

Peacock currently offers three different subscriptions: a free, ad-supported version with limited content selection; an ad-supported premium plan that provides all of its content alongside ads which costs US$5 a month; and the premium plus plan that removes the ads for US$10 a month. Company executives cited internal research, suggesting that 80% of its customers prefer the free ad-supported service. At the same time, most paying subscribers also opt for the lower cost US$5 a month advertising video on demand (AVOD) tier.

Content budgets and release strategies

The challenge for Peacock, and other AVOD services like it, is to convert subscribers currently on its free tier into paying customers – something that management is confident it can do, particularly for those currently enjoying Premium content for free via bundled deals.

As always, the volume, type, and exclusivity of movies and TV shows available is another factor – one reason why Peacock intends to grow its content budget to around US$3bn in 2022, double the 2021 figure. Investment levels are expected to be US$5bn within “the next couple of years.”

That is dwarfed by the estimated US$17.1bn Netflix pledged to spend on creating content in 2021 as it raced to catch up with production schedules disrupted by the pandemic the previous year, but still represents a sizeable chunk of the revenue (undisclosed) that Peacock hopes to make out of the service.

That US$17.1bn figure accounts for a hefty 57% chunk of Netflix’s entire 2021 revenue (US$30bn), up 19% YoY. Yet subscriber numbers grew only 9% in the same period to 222m, while average revenue per member (ARM) expanded 7% year on year in constant currency. Paid net subscriber additions also grew faster in the EMEA (7.34m) and APAC (7.14m) regions than they did in Latin America (2.42m) and the US and Canada (1.28m).

Executives have also hinted that Netflix’s investment in content production could double or triple over the next couple of years. And the recent price rises in North America implemented with one eye on funding it (DOCOMO Digital senior vice president for North America offers further analysis in his blog Netflix raises prices in the US and Canada).

SVOD news channels in the wings

The runaway success of the subscription video on demand (SVOD) model combined with the parallel decline in the number of people watching linear TV over the last few years has led other content providers to test the water with subscription services. That includes US news organization CNN, which last July announced that it would introduce a new direct-to-consumer streaming service – CNN+ – in the first quarter of 2022.[iii] Company executives said that the service would “complement” its core linear network channels, initially with 8-12 hours of live programming, on-demand, library, and interactive shows, including more detailed news analysis, lifestyle content, and non-fiction programming.

Other US news organizations already have similar platforms, notably Fox News’ Fox Nation, which transitioned to a streaming service in 2018 and offered exclusive daily shows and access to video and audio archives of Fox News programs. MSNBC is another live streaming news platform that is only available as part of a subscription to another service, such as Hulu or, more recently, Peacock. If successful, CNN+ could pave the way for a new generation of SVOD services that permanently change how people access and pay for their daily news.

[i] HBO Max and HBO hit 73.8 million subscribers, topping company forecasts, The New York Times, 5th January 2022

[ii] NBCU Shifts Peacock Focus From Free to Paid Tier, Finally Reveals Subscriber Count, Adweek, 28th January 2022

[iii] CNN to Launch CNN+ Streaming Service in 2022, The Hollywood Reporter, 19th July 2021

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