Deloitte U.S. Technology, Media, Telecom, & Entertainment Leaders Kevin Westcott and Jana Arbanas sit down with Yahoo Finance Live to talk about trends in streaming platforms, rising subscription costs, and broadening and personalizing types of content for consumers.
Video Transcript
BRAD SMITH: Well, switching gears, are you still watching– insert title here? Deloitte is out with its 16th annual Digital Media Trends Survey, and the consumption shifts of digital content are putting production houses and streaming platforms on notice. Joining us now, we’ve got Jana Arbanas, who is the Deloitte US Telecom and Media and Entertainment leader, and Kevin Westcott, who is the Deloitte US Technology, Media, and Telecom leader. Thank you both for joining us here for this conversation. I’ve been tracking this survey for years. And so, first and foremost, one of the things that I like to keep tabs on year over year is how many services the average household is still subscribing to right now. KEVIN WESTCOTT: So, actually, the number has not changed over the last few years. It’s been four for many years, the average household. Now, the younger generations, the younger households that own millennials, have upwards to seven. So they definitely see a lot more with the millennials. But the average across all households in the US has been steady at four for many years, even through the pandemic. BRAD SMITH: And Jana, when we think about the pricing because for all of these platforms, we’ve seen either some sort of incremental price hike over the years, has that led to any churn that we’ve noticeably watched? And then even further, as we go into the forecasts that companies have put out there as well, how has that impacted where they’re expecting additional subscriber counts to come forward? JANA ARBANAS: Absolutely. So we know that cost is a big factor for consumers. In fact, it’s probably the most likely reason when they drop a service. We noted that churn. So canceling a subscription or canceling and adding a subscription has held steady at 37% for the past couple of years, which is a pretty significant amount of churn that these streaming companies are having to grapple with. And cost is a main factor in that. I think consumers are looking to get the content that they want, but at a reasonable price. And therefore, they’re often dropping a service to pick up another service, as opposed to, to Kevin’s point, increasing the total number of services that they’re using. BRAD SMITH: And so, Kevin, on that point that Jana brought up, content and the spending on content that we’re seeing from all of these platforms right now, is that keeping pace with consumption? KEVIN WESTCOTT: Well, the content spending is most definitely keeping pace with– and the arms race really is about original content. Companies are spending upwards of $10 plus billion on original content. And we know through our research for the last few years that that is the number one attraction of why you pick a specific streaming service. It’s because they have exclusive content. So I think the real challenge now for all the streamers is, they can attract consumers and subscribers with original content. They need to find ways of retaining them, either by other offers, broader amounts of video, or I believe, offering other types of services, like games or music or digital books and podcasts, to broaden the attraction of the platform. BRAD SMITH: How does the perhaps customer lifecycle, how does that look different for different types of mediums, i.e. for podcasts on a podcasting streaming platform, versus, you mentioned music or some pure play that we’ve seen, of course, as we’re watching– and I love orcas, so I’m glad we found this B-roll here. But when we think about all of the different ways that you can consume content and types of content that you can consume, how does that look different across certain mediums, Jana? JANA ARBANAS: Yeah, I would say streaming video is intensely competitive. We’ve seen so much flux across the landscape in terms of new entrants into the market or mergers and acquisition activity across. And so that fierce competition, I think, is encouraging subscriber volatility because people are chasing, as Kevin mentioned, this premium content that they’re looking for. We see greater stickiness and less churn with gaming subscriptions and music subscriptions. So I think that’s an interesting thing to take note of. Perhaps it’s because the landscape is less complicated. It’s not evolving in the same way. But we do see a greater loyalty, if you will, with gaming and music subscriptions. I do think it’s an important thing for subscriber streaming video companies to really contemplate this. How do they extend the lifetime engagement with their consumer? How do they get closer to the consumer and understand what the consumer is looking for and therefore create more diverse entertainment options within one streaming service? BRAD SMITH: Is this shift in gaming, is it putting streaming, or traditional streaming as we’ve come to know it over the years for some of the movies and shows that we’ve watched, is it putting those platforms on notice, especially with that younger demographic, which is core to some of their growth strategy in the future? KEVIN WESTCOTT: Yeah, for the last couple of years, we’ve seen this trend where the youngest generation, the Gen Zs, prefer gaming over watching video. And this year, we did our research in five different countries around the world. And we found that that same trend was in all five countries. So I do think it’s putting– it’s putting a bit of a notice for the producers of long form content or, you know, or serial content that the younger generation is looking for a more interactive, maybe more social type of engagement. Now we don’t know what happens when the Gen Zs get a little bit older and have their own households, if their behavior is going to change. But if the millennials are any indication, their behaviors did not change as they left their teenage years, and now they’re in their mid-20s to mid 30s. Their behaviors are very similar to when they were teenagers. So that continues. I think we’re going to see a shift in the type of entertainment that the current Gen Zs are expecting. BRAD SMITH: Jana, last question to you. With that shift, should we anticipate even more consolidation or– of an acquisitive nature in the gaming space? Because we’ve already seen 2022 kick off with that. Perhaps that’s one of the silver linings from Q1 of 2022, is that we did see so many gaming, either developers or production houses or major companies, get acquired. And deal making certainly was at the forefront. JANA ARBANAS: I think you’re absolutely right. I think we’re going to continue to see merger and acquisition activity. I think we’re going to see streaming companies perhaps developing ecosystems with gaming companies, with social media companies. I think it’s going to cut across the different silos that consumers experience today. And if you want to call that the Metaverse or some form of that, I think it will be much more personalized. And it will cater to a number of the different needs that consumers have or desires that consumers have around connectivity, around immersive experiences, things that are super personalized to them. I do think that the future will require companies to be more expansive in terms of what they’re delivering. And whether that happens through M&A or through partnerships and ecosystems, we’ll have to see. BRAD SMITH: Jana Arbanas, who is the Deloitte US Telecom and Media Entertainment leader, and Kevin Wescott, who is the Deloitte US Technology, Media, and Telecom leader, thanks so much for joining us here on the results of this most recent survey. Appreciate it.
Add Comment