Where SVOD Falls Short

FAST channels are quickly becoming a choice option for both viewers and content rights holders.


August 24, 2022

Because Netflix pioneered and then dominated the SVOD space for more than a decade, the company’s current struggles are considered by many to signal the direction of an entire industry. Landmark subscriber losses now seem even more problematic than initially feared, and the recent about-face from Netflix founder Reed Hastings, who for years had promised no advertising on the platform, suggests nothing less than a seismic shift in streaming business models.

Proclaiming this as the end of subscription-based streaming may be presumptuous, but change is here. If SVOD isn’t in a freefall, its once-steady growth has undeniably stalled. Why?

Growing Competition

Credit Netflix for identifying a market opportunity, pursuing it and helping populate and advance the technology to bring streaming into living rooms and to smart devices. In the early days, Netflix competed with YouTube for viewership, but among pure SVOD platforms it achieved its status as industry leader by being first and beating its subscription-driven peers to the punch at nearly every key point along the way.

The streaming space has since become a crowded one, and many legacy media giants with copious resources and valuable intellectual property have decided to DIY their streaming efforts rather than piggyback off platforms such as Netflix. Competition often benefits consumers, but fragmentation in the space has created a zero-sum content game that has forced viewers to decide between paying for multiple services or binging and hopping. That’s ideal for neither customer nor company.

Rising Costs

Although streaming has arguably ushered in a golden age of television, featuring programming as brilliant and diverse as Stranger Things (Netflix), The Marvelous Mrs. Maisel (Amazon’s Prime Video) and Ted Lasso (Apple+), most viewers can’t afford or won’t subscribe to three separate streaming services. Now imagine if they also wanted to watch Yellowstone (Comcast’s Peacock), Insecure (HBO Max) and The Old Man (Hulu). Competition in the space has yielded a lot of quality content, but someone has to pay for the production costs associated with content creation. (Hint: It’s the viewer.)

Moreover, the space has reached something of a saturation point in North America. The vast majority of consumers in this part of the world who would subscribe to one or more SVODs already have. Global expansion through international content and infrastructure development can, and already are, paying some dividends. But streaming’s fragmentation, combined with the current climate of rising inflation, are making value – the intersection of cost and content quality and variety – increasingly important to viewers everywhere.

Content Changes

Even during boom times, streaming providers have budgets, which means being forced to make tough decisions about licensing existing content. To combat the constant specter of library attrition, the response from SVODs has been to create original content that can live on the proprietary platform forever. Of course, content development costs money, too. This in turn incentivizes SVODs to prioritize the original content they are creating in their own discovery strategies over licensed library content.

Additionally, Netflix and other SVOD services now have more competition to consider: AVOD and FAST. Ad-supported streaming models create an affordable, accessible distribution method for content creators and programmers, effectively democratizing and diversifying content. In particular, FAST channels are quickly becoming a choice option for both viewers and content rights holders. Subscription-based streaming platforms deliver their own type of viewing experience and a selection of high-quality originals, but SVOD providers will find it tough to beat a free, no-subscription model that already features more variety and is rapidly growing its libraries of content.

In the end, rights holders will find more opportunities for audience-building and direct revenue in ad-supported formats such as FAST for their deep library content than they would in simply licensing to the larger SVODs.

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