…And the Survey Says…
Consumer Electronics is a broad category and from our perspective is no longer just focused on the hardware we use in our daily lives. The category has become richer as the world of digital media has expanded, and as some might aver, we are on the threshold of another step function in the digital world with the popularization of the Metaverse. Putting aside the ‘things to come’ refrain for a moment, we take a look at digital media as seen through the eyes of Deloitte, who summarizes digital media trends each year through a variety of consumer based surveys. While we are always a bit wary of surveys, given that the survey format itself tends to color responses, they do give a bit of insight and interesting and surprising data relating to the long-term prospects for various forms of digital content.
Streaming video has become the standard-bearer for digital entertainment over the last 15 years, whether it is watched on a smart TV, monitor, laptop, tablet or phone, but at the same time has created an environment for consumers that has become complex and at times burdensome both from a source and a cost perspective. The challenges of convincing the current generation of digital media users to abandon more traditional forms of entertainment have dwindled as the younger generation’s proclivity and appetite toward digital media is almost an inborn attribute, so SVOD suppliers are now trying to understand what they might face as that generation becomes their primary income source.
SWOD sources are in a competitive battle with social media where personalization is the mantra and algorithms are continually refined to include more specialized personal services than just entertainment. This gives additional stickiness to those platforms with consumers and at little or no cost, while SVOD services push to monetize ‘new and exciting premium content’ that they know is just a short step away from what they have included in standard services in the past. So while SVOD services capitalized on the ‘unbundling’ of cable services to gain viewership, social media is looking to capture eyeballs by essentially unbundling everything and providing content for free, albeit with a continual bombardment from advertisers.
While this competitive situation was already developing over the last few years, the COVID-19 pandemic accelerated that timeline as consumers were forced to shelter in place and became even more starved for the ‘companionship’ that the digital world can provide. Concepts like the Metaverse, where consumers can wander through universes, real or unreal, through the anonymity of an avatar while sitting on their living room couch, now seem somehow plausible and an obsession with everyday folk dancing on TikTok has replaced watching cat videos to generate a bit of well-needed excitement. But as the world begins to work through ways to control the COVID-19 virus and allows consumers the option to return to what was their previous ‘external’ life, will the momentum toward social media and a less social world remain, or will we revert back to a less digital social life?
The Deloitte survey was conducted in December of 2021 and included 2,000 US consumers, along with comparative surveys in the UK, Germany, Brazil and Japan with the data being weighted nationally, with 5 generational categories as follows:
Figure 1 shows the churn rate, meaning those US consumers that added and cancelled SVOD services during the past 12 months, broken down by age category. With Gen Z and Millennials obviously the most prone to ‘gaming’ SVOD services, the churn challenges facing those providers will likely continue to increase as Gen X, Boomers, and Matures age out, but all is not lost for SVOD providers as those same younger generations are more likely to cancel services and then resubscribe, which is shown by country (and average) in Figure 2. While Figure 2 is a bit of a positive for the SVOD community, churn reduces visibility and increases cost, so SVOD suppliers are looking for ways to keep subscribers from cancelling a subscription when the season for a particular show ends and resubscribing when the show begins its next season, a common practice.
Streaming video has become the standard-bearer for digital entertainment over the last 15 years, whether it is watched on a smart TV, monitor, laptop, tablet or phone, but at the same time has created an environment for consumers that has become complex and at times burdensome both from a source and a cost perspective. The challenges of convincing the current generation of digital media users to abandon more traditional forms of entertainment have dwindled as the younger generation’s proclivity and appetite toward digital media is almost an inborn attribute, so SVOD suppliers are now trying to understand what they might face as that generation becomes their primary income source.
SWOD sources are in a competitive battle with social media where personalization is the mantra and algorithms are continually refined to include more specialized personal services than just entertainment. This gives additional stickiness to those platforms with consumers and at little or no cost, while SVOD services push to monetize ‘new and exciting premium content’ that they know is just a short step away from what they have included in standard services in the past. So while SVOD services capitalized on the ‘unbundling’ of cable services to gain viewership, social media is looking to capture eyeballs by essentially unbundling everything and providing content for free, albeit with a continual bombardment from advertisers.
While this competitive situation was already developing over the last few years, the COVID-19 pandemic accelerated that timeline as consumers were forced to shelter in place and became even more starved for the ‘companionship’ that the digital world can provide. Concepts like the Metaverse, where consumers can wander through universes, real or unreal, through the anonymity of an avatar while sitting on their living room couch, now seem somehow plausible and an obsession with everyday folk dancing on TikTok has replaced watching cat videos to generate a bit of well-needed excitement. But as the world begins to work through ways to control the COVID-19 virus and allows consumers the option to return to what was their previous ‘external’ life, will the momentum toward social media and a less social world remain, or will we revert back to a less digital social life?
The Deloitte survey was conducted in December of 2021 and included 2,000 US consumers, along with comparative surveys in the UK, Germany, Brazil and Japan with the data being weighted nationally, with 5 generational categories as follows:
- Gen Z Born: 1997 – 2007 Age: 14 – 25
- Millennials Born: 1983 – 1986 Age: 26 – 39
- Generation X Born: 1966 – 1982 Age: 40 – 56
- Boomers Born: 1947 – 1965 Age: 57 – 75
- Matures Born: Prior to 1947 Age: 76+
Figure 1 shows the churn rate, meaning those US consumers that added and cancelled SVOD services during the past 12 months, broken down by age category. With Gen Z and Millennials obviously the most prone to ‘gaming’ SVOD services, the churn challenges facing those providers will likely continue to increase as Gen X, Boomers, and Matures age out, but all is not lost for SVOD providers as those same younger generations are more likely to cancel services and then resubscribe, which is shown by country (and average) in Figure 2. While Figure 2 is a bit of a positive for the SVOD community, churn reduces visibility and increases cost, so SVOD suppliers are looking for ways to keep subscribers from cancelling a subscription when the season for a particular show ends and resubscribing when the show begins its next season, a common practice.
- US Streaming Video On Demand Churn - Source: SCMR LLC, Deloitte
Cancel & Resubscribe - Streaming Video On Demand Services - Source: SCMR LLC, Deloitte
One potential solution for SVOD providers would be to reduce streaming service costs by supplementing income from ads, similar to how social media supports itself. The question is whether consumers who are paying for such services (as opposed to free social media) would be willing to agree to such plans and at what price point would it begin to alleviate ‘seasonal’ or other churn? While Figure 3 gives some insight into the question, with the most ‘popular’ option being 12 minutes of ads per hour and no fee, we were surprised that the ‘no ads - $12 fee’ option scored almost as high on average.
Taking it a bit further the survey looked at some alternative options that might keep consumers from switching in and out of SVOD services. These ranged from a typical ‘no ads or restrictions for an annual fee’ to ‘no option would keep the subscription’, with a few gradations between including ads, time restrictions for premium content, and delayed sports coverage. Surprisingly the ‘no option would keep subscription’ scored the highest on average, with over 50% of consumers in Japan opting for that option and just over 40% on average. Outside of the survey data shown in Figure 4, US consumers indicated that when thinking about cancelling an SVOD service, 37% would stay if they had access to 1st run movies and 34% would stay if there was a loyalty program, while more specifically, 51% of Gen Z and Millennials would stay if their SVOD subscription included a gaming or music service.
Taking it a bit further the survey looked at some alternative options that might keep consumers from switching in and out of SVOD services. These ranged from a typical ‘no ads or restrictions for an annual fee’ to ‘no option would keep the subscription’, with a few gradations between including ads, time restrictions for premium content, and delayed sports coverage. Surprisingly the ‘no option would keep subscription’ scored the highest on average, with over 50% of consumers in Japan opting for that option and just over 40% on average. Outside of the survey data shown in Figure 4, US consumers indicated that when thinking about cancelling an SVOD service, 37% would stay if they had access to 1st run movies and 34% would stay if there was a loyalty program, while more specifically, 51% of Gen Z and Millennials would stay if their SVOD subscription included a gaming or music service.
Ad-Supported Option - Consumer Preference - By Country - Source: SCMR LLC, Deloitte
Other Options - Consumer Preference - By Country - Source: SCMR LLC, Deloitte
That last statement from Gen Z and Millennials seems to lead back to the somewhat obvious focus of younger generations toward gaming and social media content. In regard to social media, the survey questioned respondents as to what they do on social media, and while other surveys we have seen seem tend to disagree at times, the use of social media to watch or read news is the largest category at ~38% on average, as shown in Figure 5, followed by listening to music at 30%. There are certainly variations between countries, such as the difference between the US, where listening to music took the top spot at 28% and news was 2nd at 27%, and Japan where news was 52% and music was 29%. Most surprising in this category was the low averages for playing games (19%) and watching sports (12%) but we note that the data here is across all age groups, rather than just Gen Z and Millennials.
One area that is, or should be of concern to SVOD providers is the content itself, as 70% of Gen Z and 66% of Millennials say they spend more time watching user-generated content than they planned to and 59% and 63% of those groups say they spend more time watching user-generated content than 6 months ago, while 56% of Gen Xers indicated that they watch more user-generated content than they did 6 months ago.. Even more consequential is that 57% of Gen Z, 60% of Millennials, and 45% of Gen Xers indicated that they spend more time viewing user generated content than TV shows or movies, which would be an important metric for the SVOD community to gauge the value of branded streaming content.
If the value of SVOD content is lessened by user generated content, meaning that of influencers who promote lifestyles and products, and businesses find increasing value in ads and retail sales surrounding that content, consumer spending toward SVOD services would decline and SVOD content creation budgets would be affected. While this might seem a bit far-fetched 70% of US survey respondents indicated that they followed an influencer and 33% of those indicated that said influencers made a difference to their buying decisions, with that share increasing to over 50% for US Gen Z and Millennials. That trend is certainly a global one with 88% of Brazilian respondents indicating they follow an influencer and 79% in Japan, so while SVOD providers compete with each other to create more valuable content, they are really competing with social media where advertisers and influencer sponsors can capture revenue from product sales and social media firms can garner higher advertising rates, but underlying all of that is the social connection that social media provides that is absent from most SVOD services, and we see this as most concerning when it comes to the aging of the Gen X and Boomer age groups.
As the younger generations, who seem to be more oriented toward social interaction through digital media than physical social interaction, the trend away from SVOD services will likely continue unless changes are made to pricing and/or service content. The logical progression in our view would be for SVOD providers to become more social media conscious, such as providing Twitch-like services that would allow SVOD users to watch content with friends, something gamers have been doing for years, changing content scheduling so as to offer similar popular content for a more extended portion of the year, or the ever popular loyalty programs that give subscribers free content if they remain a full year subscriber. It will be a difficult battle for SVOD providers as they come up against changes in attitudes toward the value of SVOD content, and a tie to gaming would certainly help to maintain younger subscribers, but the real question will be whether SVOD providers understand that while they were the successful radical alternative to cable’s service bundles, social media is heading toward being the radical alternative to SVOD and video content providers must change or accept a far more competitive and less profitable environment.
One area that is, or should be of concern to SVOD providers is the content itself, as 70% of Gen Z and 66% of Millennials say they spend more time watching user-generated content than they planned to and 59% and 63% of those groups say they spend more time watching user-generated content than 6 months ago, while 56% of Gen Xers indicated that they watch more user-generated content than they did 6 months ago.. Even more consequential is that 57% of Gen Z, 60% of Millennials, and 45% of Gen Xers indicated that they spend more time viewing user generated content than TV shows or movies, which would be an important metric for the SVOD community to gauge the value of branded streaming content.
If the value of SVOD content is lessened by user generated content, meaning that of influencers who promote lifestyles and products, and businesses find increasing value in ads and retail sales surrounding that content, consumer spending toward SVOD services would decline and SVOD content creation budgets would be affected. While this might seem a bit far-fetched 70% of US survey respondents indicated that they followed an influencer and 33% of those indicated that said influencers made a difference to their buying decisions, with that share increasing to over 50% for US Gen Z and Millennials. That trend is certainly a global one with 88% of Brazilian respondents indicating they follow an influencer and 79% in Japan, so while SVOD providers compete with each other to create more valuable content, they are really competing with social media where advertisers and influencer sponsors can capture revenue from product sales and social media firms can garner higher advertising rates, but underlying all of that is the social connection that social media provides that is absent from most SVOD services, and we see this as most concerning when it comes to the aging of the Gen X and Boomer age groups.
As the younger generations, who seem to be more oriented toward social interaction through digital media than physical social interaction, the trend away from SVOD services will likely continue unless changes are made to pricing and/or service content. The logical progression in our view would be for SVOD providers to become more social media conscious, such as providing Twitch-like services that would allow SVOD users to watch content with friends, something gamers have been doing for years, changing content scheduling so as to offer similar popular content for a more extended portion of the year, or the ever popular loyalty programs that give subscribers free content if they remain a full year subscriber. It will be a difficult battle for SVOD providers as they come up against changes in attitudes toward the value of SVOD content, and a tie to gaming would certainly help to maintain younger subscribers, but the real question will be whether SVOD providers understand that while they were the successful radical alternative to cable’s service bundles, social media is heading toward being the radical alternative to SVOD and video content providers must change or accept a far more competitive and less profitable environment.
Social Media Preferences - Consumer Preference - By Country - Source: SCMR LLC, Deloitte
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