Netflix announces its profits of Q1 & # 39; 19 on Tuesday, when we know for sure whether the increase in the subscription price was a good relocation in the short term. Meanwhile, Disney has announced that Disney +, the new streaming services platform, will only cost $ 6.99 per month and will exceed inventory by more than 11 percent overnight.
This further complicates the debate on the pricing model for streaming services, as Disney overshadows Apple's role, which had dominated the technical news cycle for weeks after the announcement of competing OTT streaming services to Netflix, Amazon and Hulu, AppleTV +. With big names like Steven Speilberg and Oprah present to support Apple's credibility in the ever-busier OTT market, Apple sent a clear message that, in the words of one manager, "they are dedicated to telling stories on every screen in your life. "Although it may have been tempting to be distracted by the procession of celebrities who went to the Steve Jobs Theater stage, Apple's silence on a topic became deafening at the Twittersphere when everyone started asking about the key question who remained unanswered: How much does this cost? Disney has shared, why can't you?
CNBC media reporter Alex Sherman, who personally attended the unveiling, tweeted "We have half an hour of actors talking about their shows without clips and zero details about Apple & # 39; s original content prices or as channel services will be bundled for a discount. The general mood here is shock and slight annoyance to the people who care about me "Vox & # 39; s critic Todd VanDerWerff thought that" Apple's new streaming service is still largely determined by what we don't know. "
He is right. The company chose not to deal with pricing details or the potential savings that users could make by bundling them with other Apple services. What we do know that Apple TV + will be a subscription service without ads. This announcement meant an interesting debate about which business model – whether advertising-supported or subscription-driven – is likely to attract a large-scale consumer audience.
Apple and now Disney's decision to abandon ads are in stark contrast to recent reports from YouTube from Google, which instead claims to want to expand ad-supported content, while possibly focusing on subscription models and Viacom PlutoTV owns that doubling of its completely free ad-supported model. Google denies that it will completely abandon its subscription model as others reported later, but it is clear that & # 39; the world's largest advertising company sees an important opportunity to offer premium content for free in an advertising-supported environment.
As the debate unfolds over ad-supported models versus subscription-based revenue streams, the real question marketers and content platforms must ask is, "What do consumers want?" The answer is both.
To begin with, it is important to set the level by clarifying that OTT is now mainstream, and this is not a niche consumer audience. In collaboration with the Harris Poll, OpenX conducted a nationwide study of OTT users released this week, showing that the majority of US consumers now stream at least one OTT service, with most streamers subscribing to an average of three platforms. Within this growing group of streamers, there are very different opinions about the desired billing models that offer platforms a broad opportunity to be creative with how they generate income with their content.
The study found an almost equal distribution between those who want to pay a subscription fee in exchange for zero advertisements with a small majority opting for a form of advertising to reduce or eliminate subscription fees. Forty-six percent of consumers prefer a service that costs $ 10 / month without ads. Interestingly, the survey also showed that consumers would be willing to pay as much as $ 24 a month for a primary subscription – almost twice the monthly Netflix rate of the most popular subscription now $ 13 / month (from $ 12 per month ), indicating clear upward price-setting mobility for an ultra-premium provider on the subscription market. I expect the earnings call on Tuesday to report no significant pain in sales due to this increase.
That said, there is a potentially missed opportunity for streaming providers, including Netflix and Apple, to release a differentiated pricing model that includes ad-supported, competitively priced, and free subscription models.
Of the 2,002 American consumers who answered The Harris Poll's Open81 command, 54 percent would opt for an advertising-supported model; 29 percent prefer a service that costs around $ 5 / month with 2-3 minutes of ads per hour, while the other 25 percent prefer a free service with up to 10 minutes of ads per hour. The clear message here is that there is room for multiple models and that a "one size fits all" approach (or single billing models) is likely to be replaced by a menu with options tailored to consumer preferences. One guide to be followed comes again from the national survey of OTT users that revealed the sweet spot of content and costs – which I would call the 15/100 video line. Consumers today watch around 15 channels with cable TV and if the price were not a problem, they would be open to watching 15 different OTT services. For costs, whether it's OTT or cable / satellite, viewers are comfortable spending around $ 100 / month to have access to the content they want to view.
Consumers do not want an unlimited number of choices and they do not want to pay for channels that they do not watch. Just as the demand for different OTT providers is increasing, so are the diversity of revenue models. Less than five percent of all TV advertising dollars flow to OTT channels today. As the eyeballs continue to migrate to streaming platforms, OTT ad dollars will follow quickly – and are scheduled to surpass the overall growth of all ads by 2019 five times. Only investments in content do not determine the winners of the losers in the OTT race. Which platforms also receive the pricing formula, content portfolio and user experience will ultimately lead to market leadership in the fast-growing OTT market.
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