Streaming Fragmentation

What’s Driving the Multi-Tier Subscription Trend?


May 18, 2022

Looking over today’s vast SVOD landscape, a casual observer might get the sense that viewers have had virtually limitless subscription streaming options from which to choose from for a long period of time. But it only feels that way.

In fact, while one estimate puts the total number of current SVOD providers on the market at more than 200, it was only a few short years ago that the number of subscription streaming services could almost be counted on two hands. Networks and media companies have watched a former mail-order movie distributor (Netflix) and one-time online book store (Amazon) turn streaming into big business and decided to throw their hats in the ring, along with a parade of startups and entertainment newbies.

With the flooding of the SVOD market has come its fragmentation. As more providers enter the space, each must work that much harder to attract a portion of a relatively static subscriber base. Many services have attempted to use a combination of original content and bingeable shows to draw customers, while others have hitched their wagon to a slow-rolling premium title (See Apple+ and Ted Lasso or Disney+ and The Mandalorian) in hopes that viewers will keep coming back to find other content they enjoy.

But the reality is consumers have only so much time in a day to view content and so many discretionary dollars to spend. Plus, many have become SVOD-savvy over time, burning through a provider’s content offerings, unsubscribing and moving on to the next one – creating market churn and poking holes in the monthly revenue model of many streaming platforms.

The streaming industry response has been the creation of multi-tiered services: premium, standard and ad-supported. This strategy may help win over some viewers and strengthen a platform’s connection to given markets. However, it also fundamentally alters, or at least splits, a provider’s business model. An SVOD may embrace an AVOD strategy, for instance – a concession to the continued demand for free viewing options in the marketplace. Netflix is exploring that direction right now.

Ad-supported streaming already has been proven successful as both a bundling option and a free-standing platform all its own. While most viewers can afford, or choose to purchase, only two or three SVOD subscriptions at once, there is no financial limit to the number of AVOD and FAST platforms or channels a viewer can access at any point in time. FAST, in particular, provides an always-on format that many viewers prefer either as an alternative or an add-on to VOD. The growth of linear streaming solution providers such as Frequency has proved to be a development that is mutually beneficial to both viewers and streamers.

As more creators and media organizations recognize the value of the FAST platform and the growing demand for linear programming, the space will grow more robust with content and features – even as the fragmentation of the streaming landscape continues in earnest.

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