Too much choice in subscription OTT is leaving consumers feeling overwhelmed and out of pocket. It’s time to think about mixed monetisation models, says Bill Swanson.

Consumers aren’t short of options to feed their premium video appetites. As the likes of Netflix and Amazon have made on-demand, multi-channel viewing the new TV norm, content creators have put production into overdrive.

Over-the-top (OTT) subscription content is growing fast; with new players such as Disney+ and Apple TV Plus emerging to join established heavyweights. For consumers, this variety is a mixed blessing. They have the freedom to watch high-quality, long-form video anywhere via a myriad of connected TV (CTV) services, and they enjoy it – Britons spent £100 million a week on streaming digital entertainment in the first half of 2019. Yet the cost of constantly expanding streaming libraries is adding up to an unmanageable expense, as well as inducing subscription fatigue.

Media companies face a fresh challenge in the battle for consumer attention: keeping revenue and reach strong when audiences are tired of paying for content through multiple subscriptions and providers.

The solution? Advertising. Yes, really.

Ads: the tried and tested solution

Charging nominal fees for content access has worked well for non-ad-supported platforms – so far. In the last seven years, use of streaming services has gone from zero to almost half (47%) of British homes, and subscription income has allowed media providers to invest in a wider range of content; Netflix alone spent $13 billion on licensing and production in 2018. Moreover, it was recently revealed that the amount Netflix and Amazon spent on British-made TV programmes almost doubled last year to £280 million. This equates to 12% of the £2.3 billion total spend by domestic TV companies – including Sky, BBC, Channel 4 and ITV – on making programmes with UK producers.

But ad-free, subscription-based models are becoming unsustainable. Too much choice is leaving consumers feeling overwhelmed and out of pocket, with a third unwilling to pay for more streaming services because they think they have enough. As the market continues to grow, enticing audiences to pay out will be an increasingly difficult task, making new revenue models inevitable. Streaming platforms should be looking to extend their monetisation horizons to include an ad-funded model: blending ad-supported video on demand (AVOD) and subscriptions to boost audience appeal.

At first, this transition may be slow. Platforms used to working with a single model will be likely to stick with one method, such as ad-free or paid-for content only. But the hunger for profitability will soon lead to mass adoption of free, ad-powered content options. Especially with Hulu experiencing great success with its hybrid model, Netflix testing ads, and YouTube attracting viewers with a wide range of easily accessible content.

Win-win situation

Mixed monetisation models aren’t just about creating a wider safety net. While media organisations will stand firmer with multiple revenue streams under their feet, they can also benefit from the improved scale advertising can deliver, as well as better personalised targeting .

It would appear that currently, the OTT ecosystem is progressing towards the same problem that caused wider pay TV popularity to plummet: inaccessibly high prices. Though numbers of active streaming subscription users now outstrip pay TV figures by five million, there is growing irritation about creeping costs, with 80% of consumers complaining they are paying too much to stream.

By adopting a no-cost ad-supported tier, companies can open content back up to those who want to watch the latest shows — and join the cultural conversations they spark — but who can’t afford ten subscriptions. Plus, bringing content within reach for the entire socio-economic spectrum will also pave the way for huge growth in audience size and advertiser interest.

Getting cross-screen and personalisation right

Before media companies rush to adjust their models, there is one final caveat to consider: advertising success depends on how it’s used. It’s important to remember that cross-screen viewing is a major part of the multi-channel TV era. Consumers move between both platforms and devices, and are increasingly leaning towards mobile, with time spent viewing mobile media set for an 11.9% hike this year.

Mobile-only streaming service Quibi is hoping to take advantage of this. With promises of high-quality content in ten minute episodes designed for watching on mobile devices, the service plans to launch in the US and UK in 2020, with an estimated £5 a month fee. However, it’s yet to be seen whether such a mobile-only service will be popular – and whether viewers will pay for yet another subscription.

Currently, if content producers want ads to make a positive impact, the experiences they provide must adapt to the changes in behaviour that come with screen switches, as well as individual interests. In other words, ads need to be personalised. At a basic level, this might involve using smart delivery tools to automatically select the right kind of ads for device type, such as long-form video for TVs with strong internet connections, or short 6-second ads for mobile users in areas with unstable wi-fi.

Taking customisation up a notch, ad insertions should be tailored to individual preferences and habits. Consumers want all content to be seamless and relevant; they expect the ads viewed on smartphones to tie in with messages seen on CTV. This means synchronised, bespoke ads are essential to keep audiences satisfied – media owners must ensure that the ads account holders see match their location, viewing history, and demographic, no matter how they are accessing the platform.

As quickly as consumers have embraced streaming, they may just as rapidly unsubscribe if media companies don’t address the increasing fatigue issue. It’s time to recognise that the driving force of OTT’s past success can’t support future growth: refusing to budge beyond subscriptions won’t keep revenues rolling. If they want to survive, media owners will have to evolve; enhancing the monetisation models by including ad-supported options and harnessing personalised, engaging ads to maintain their hold on audience attention. In order to not only survive but to grow and thrive in this market media owners must embrace the technologies that allow them to adapt to this ever changing and growing market and consumer behaviour.

Engaging eyeballs whilst watching content is as important as keeping users engaged during an ad break. Those who create and plan for both will succeed.