Deloitte’s latest digital media trends survey found that streaming video-on-demand (SVOD) services face greater pressure to attract and retain subscribers who have become more cost-conscious and savvier about their subscriptions.
Over the last 15 years, screen-based entertainment has expanded beyond TV and movies as streamers and studios struggle to attract and retain younger generations who flock to their smartphones, social media and video games for immersive experiences. Although SVOD has disrupted TV and movies, the medium itself hasn’t evolved sufficiently enough to attract the new subscribers needed to continue growing the way social media has, according to Deloitte’s findings.
Social media has evolved into a form that delivers an array of personalized content in a variety of forms. It’s also shoppable, playable, and, perhaps most attractively, free. As if social media isn’t engaging enough as is, top services are constantly generating new lines of revenue, boosting features and innovation and in turn, increasing engagement and consumer dollars.
As more major media providers launch their own streaming video services, two things have happened: competition among them has intensified and their value proposition to audiences is deteriorating.
The growth of leading SVOD services’ subscribers has slowed in the North American market—something those services may experience as they pursue the ever-maturing global markets. Meanwhile, consumers are experiencing their own challenges—as they get their entertainment through the increasingly fragmented SVOD landscape, the amount of effort and money to do so grows. For example, consumers in the US said they experience frustration when they have to manage multiple subscriptions, receive poor recommendations and lose content to other services.
And that’s when consumers churn: they cancel, or add and cancel, a paid SVOD service. The average churn rate in the US has remained consistent at about 37 percent across all paid SVOD services. In the UK, Germany, Brazil and Japan, the overall churn rate is roughly 30 percent, Deloitte found.
Despite how attracted people are to SVOD content, they often leave due to cost—especially Gen Z users. And because it costs money to acquire subscribers, losing them too quickly hinders providers’ ability to recoup acquisition costs. Nevertheless, losing them doesn’t mean it’s permanent—roughly 25 percent of US consumers and about 22 percent in the UK, Germany, Brazil and Japan have resubscribed to a previously canceled streaming video service within 12 months. Younger generations are more prone to churn and return than older generations.
Deloitte says the reasons for this phenomenon vary according to age; for some, a new season of their favorite show was released or their desired content moved to the service, and for others, a free period or discounted rate lured them back. About 25 percent of respondents to Deloitte’s survey cited cost as a consistent cause of their canceling and resubscribing.
Many respondents that consider canceling a paid SVOD service globally report being likely to keep their subscriptions if they could get a discount. In the US, respondents considering canceling a paid SVOD service report being willing to stay if they would be offered access to first-run movies (37 percent) or a loyalty program (34 percent). For Gen Z and millennial subscribers, roughly 51 percent report being willing to stay if the subscription included a gaming or music service or an additional SVOD service.
According to the survey, watching movies and TV at home continues to be respondents’ overall favorite entertainment activity, particularly for older generations. In the US, the UK, Germany, Brazil and Japan, playing video games was rated as the favorite entertainment activity.
Although SVOD audiences are larger than they ever have been, social, interactive and shoppable experiences are taking up more of consumers’ time and money. Retention for SVOD services is also challenged by social media and gaming. For many, social media is a form of entertainment, a way to connect with others and a source of information.
Social media content, unlike SVOD, is bite-sized, can be very personalized, and easy to engage with for one minute or one hour. In the US, for example, nearly 80 percent of social media users report using social media at least daily and 59 percent use it several times a day.
Roughly half of US respondents watch more user-generated content (UGC) than they did six months ago while half say they always end up taking in more UGC than they had planned to. For Gen Z consumers, that number jumps to 70 percent. Additionally, about 40 percent of US respondents, and 60 percent of Gen Z and millennials, watch more UGC than TV shows and movies on video streaming services.
Gaming competes for screen time, too. Over 80 percent of US men and women report playing video games while 50 percent report that they have taken time away from other forms of entertainment. Half of smartphone owners say they play games on their phones daily and these figures increase for younger generations.
Gaming and music also appear to be closely linked. Roughly half of the respondents to Deloitte’s survey said they discovered new music while playing video games. Part of that discovery involves the increase in live in-game events—for example when rapper Travis Scott performed in Fortnite for tens of millions of viewers globally.
Live in-game events offer unique opportunities for brands and performers to reach fans in countries or socioeconomic conditions that would otherwise prevent them from attending. Deloitte research found that as many as 25 percent of US gamers—particularly millennials and men—have attended an in-game event within the last year.
With large, global audiences tuning in to top gaming platforms, advertisers are working to reach and influence them by way of greater personalization. As Deloitte notes, digital clothing, skins and gestures increasingly include branded virtual goods. For example, as the metaverse becomes developed, the ability to enhance your avatar’s appearance with a pair of your favorite brand of sneakers or buy a designer purse you’ve always eyed will be a real possibility.
On where digital media is headed, the report said:
“A major shift is underway, one that could radically recompose internets and economies . . . For now, streaming video, social media, and gaming are all very successful without full immersion, tokenized economies, and universal interoperability. But the twin engines of capital and human behavior may be moving irrevocably toward that kind of unlimited reality. Media and entertainment companies may need to collaborate more to create a future where they remain at the center.”