Five steps for improved media revenues

Cautious consumers are cutting back on streaming services. That increases the pressure on media companies to deliver the goods.

With millions of consumers confined to their homes during the pandemic, the media industry boomed. Streaming services picked up an additional 12 million subscribers in the UK alone and hit 308.6 million, a rise of 32%, in the US. Through 2020, the industry reached a new milestone: global subscriptions of streaming services surpassed 1 billion. The industry anticipated a golden age. A slew of new services hit the market; Disney+ launched with enormous success, followed swiftly by HBO Max (now Max) and Discovery+. Small and large media companies alike were eager to get in on the action.

Alas, it wasn’t to last. Following pandemic peaks, subscription rates started to tail off. Now, amid economic uncertainty, they’re set to drop farther. In some geographies, analysts predict a significant dip as original content trails off from strikes and customers tighten their belts. In others, increased competition is set to push once-dominant streamers out. Disney+, for example, grew significantly through the pandemic, but recently admitted it’s having trouble keeping subscribers locked into its offerings.

One of the great issues facing media companies is how they build sticky subscription models while managing costs, as the industry comes to terms with a post-pandemic world in which digital consumption hasn’t jumped forward as rapidly as expected. To do so there are five focus areas in which, with the right deployment of technology, content streaming businesses can improve revenues and profit.

1.    Distinguish with content

As consumers go back to the office and once again pursue their pre-pandemic leisure activities, viewing times are shrinking—along with the value assigned to subscription services. To woo them back, media companies must become the must-have service in a highly competitive market—and that means it’s all about developing the best content.

To do that, media giants need to reexamine the value data brings to their organization. While historically, user data is exploited to push recommendations and surface new content (more on this later), user data is increasingly used to help understand what content viewers want. For almost a decade, Netflix has used user data to make big bets on new shows. For example, the firm went all in on House of Cards because data projected that audiences would respond to its intersection of theme, directors, tone, and stars.

Using trillions of data points, streamers armed with the right technologies can predict and develop the next big hit that will keep viewers hooked. And they can work with partner organizations to broaden access to a wider range of content. For example, Amazon's Prime TV is striving to tackle one pain point—the complexities of managing multiple subscriptions—by integrating different services onto its platform. Viewers can access more content from a wider variety of sources, without needing to service an unwieldy portfolio of separate services.

2.    Grow the tail for tentpole shows

Other providers recognize that becoming the one-stop shop for the best content is only half the battle. Keeping subscribers hooked once the latest big hit is over is a challenge that breaks the boom in binge consumption. Leading providers are exploring ways to keep eyeballs returning to their services by staggering the release of episodes over longer periods; the idea is to elongate the tail of big hits while the provider finds the next one.

As an example of the impact, take the Netflix viral series Squid Game. Viewers were able to initiate a subscription, binge the series in a single sitting, and then cancel their subscription, paying for only a single month.

Responding to this much-needed shift, Netflix recently announced it was experimenting with new scheduling formats—with many lamenting the fall of the binge-watching trend. Streamers may need to reinforce the social element of weekly episode drops to build anticipation. Research from Statista reveals that consumers generally prefer to watch multiple episodes of a show more frequently than weekly, more-so in younger demographics.

However, those of us from certain generations remember the value of shared experiences around the watercooler when we were young. Today, those experiences often occur online. As evidenced by shows like Max’s The Last of Us and Succession, weekly shows accompanied by behind-the-scenes content, live companion shows, and podcasts generate buzz that ripples into popular culture.

When shows are released over a longer period, the length of the average subscription expands as well. Media companies need to develop content plans and subscription packages that keep consumers logged on—for example, understanding how high-impact TV shows such as Squid Game can be a prolonged reason to engage with their company, rather than a one-month subscription. Streamers may also want to surface personalized recommendations that get their customers hooked on a diversity of content.

3.    Personalize content, experiences, and business models

And this is where the biggest shift must take place. In addition to keeping consumers hooked on new content, it is equally important to understand audiences, down to the individual, to surface long-tail content that diversifies the diet beyond tentpole content. Due to the protracted writers’ and directors’ strike, the flow of original content that keeps subscribers tethered to services ebbed recently. This underscored the importance of using machine learning and artificial intelligence to optimize the content that exists by aligning it tactically to receptive viewers.

Consumers increasingly demand personalization that moves beyond curated content. Max’s decision to merge HBO Max and Discovery+ was driven by the opportunity to offer consumers a balanced diet of content experiences, with the experience element being key. The ability to understand customers and learn their tastes can help consumers get more value from a service by diversifying their diet and perhaps introducing them to options they may not discover on their own.

There’s also a need to tap into new revenue generating opportunities through greater customization of subscription packages. Some consumers will prefer a cheaper ad-filled service, while others plumb for a premium subscription to avoid ads entirely. In the future, however, consumers will expect greater granularity, with decisions based on specific content. For example, when watching the latest blockbuster, they may opt to make a one-time payment to watch unhindered by adverts, while sticking to an ad-based package for other content.

Of course, personalization relies on quality data and process and cultivation of a holistic view of individual customers and customer segments. For Max, stickiness is a function of a maturing data strategy.

4.    Reinvent advertising

Retaining subscribers is just one aspect of the equation for media companies. While some rely solely on subscription revenues, others heavily depend on advertising income. The consensus among analysts is that media companies require both revenue streams.

As digital advertising marketplaces mature, marketers seek more granular audience-based products, increased transparency, and better (and proven) returns on their advertising investments. This necessitates scalable platforms offering dynamic audience targeting parameters and precise measurement. Paired with brand-safe and premium content, these efforts can drive substantial outcomes.

Ad sellers must align to meet the modern expectations of their buyers. The imminent loss of third-party signals emphasizes the growing importance of the two big trends in the next advertising wave: AI-driven decision intelligence and data integration across ecosystems. By using AI, streamers can inform and automate decisions related to selling and fulfilling inventory, such as how to split shows into highest value audiences, and how to make trade-off decisions between meeting campaign-level obligations and driving yield.

Concurrently, by merging first-party data insights from various partners, a media company can gain deeper customer understanding and enhance response measurement. Leveraging these trends requires data and AI strategies and will feed downstream integrations and automation to scale decisions from “pitch-to-pay.”

5.    Think beyond streaming

Media companies must also challenge the notion that content should as a rule be reserved for streaming services. Instead, deeper insights generated on consumer behaviors enable leaders to find the right channel for their content—for example, reserving major motion pictures for traditional theatrical channels initially, before moving the content to premium streaming services at a later date.

To this end, both David Zaslav, CEO of Warner Bros. Discovery, and Bob Iger, CEO of Disney, have announced their intent to be more surgical in producing the least streaming content needed to sustain growth, while potentially holding content back for more lucrative distribution models—including theatrical and licensing.

Retooling to deliver the services customers want

In a time of uncertainty, media companies that want to lead the way must fine-tune a business model predicated on giving consumers the services they want at a time and in the format they desire. Moreover, they must develop the technical capabilities required to personalize advertising and marketing services to target the right consumers and provide buyers with the evidence they need to judge a campaign’s real-world success.

This in turn calls for a digital transformation. Redefining content strategies to present more highly personalized options to consumers and, in the process, bring advertising buyers the targeted services they crave calls for sweeping technological change. To this end, we recently laid out the core roadmap the media and entertainment industry must follow to remain future-ready—a journey that will involve companies understanding and redefining customer value propositions, then retooling to deliver them, at a pace and scale that keeps up with the rapid evolution of the industry.

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