The U.S. video streaming market is projected to reach $750 billion by 2031, according to new data from Future Market Insights. The industry has moved beyond infancy into adolescence, and with any growth, there is also speculation of consolidation. Will Disney buy or sell Hulu, will BET and Showtime find buyers, and is Netflix, Microsoft's next acquisition—back on the table?
Also, stemming the fragmentation of the ecosystem is the business model. There are more FAST channels than ever, and expansion is happening faster than viewers can keep up with. Just take a look at Evan Shapiro's latest Map of FAST. In a 2022 study from EY of media and entertainment, executives say reinvention is necessary to sustain. Over a third of executives say that without reinvention, their company will no longer exist in five years, and they understand the imperative for change.
This post examines the challenges and opportunities of how the industry has evolved and it's a double-edged sword. Let's explore.
What is fragmentation and what's causing it?
An increasing number of new and original content libraries are now accessible through a vast number of distribution points that consumers can choose from. While media and entertainment executives say that they can no longer rely on traditional business models; these models are also losing the original value proposition for viewers, simplicity.
Challenge 1: Increased Competition
Content distribution strategies, ad targeting approaches, and user experience in a complex ecosystem are at odds. Fragmentation has led to intensified competition among streaming services, resulting in skyrocketing content development costs, disparate viewing, and unclear data and analytics to attract advertisers, impacting profitability. This year, the streaming industry is estimated to spend $113 billion on original content development just in the U.S. See the latest estimates for the top seven streamers from Netflix to Disney on IndieWire.
Opportunity: Accelerated Technological Innovation
Despite the economic downturns, the global video streaming market size is expected to reach USD 223.98 billion by 2028. Streaming services can now strive to differentiate themselves by offering unique features, exclusive content, and personalized experiences. According to Horowitz Research, streaming services focused on users' experiences centered on unified experiences for show discovery could help viewers discover content they would not have otherwise watched. Increasing time on site means reducing viewers' coming and going frequency. Ultimately, the unified experience will extend the viewer's reach and attention and support user journeys.
Challenge 2: Monetization and Revenue
Subscriptions and ad revenue have dropped for SVOD (subscription video-on-demand) and AVOD (advertising-based video-on-demand), with an uptick in global FAST (free ad-supported television) viewing and channels. Today's digital-savvy consumers expect to access free or pay less for streaming content. According to a consumer study from Yahoo and Publicis Media, nearly half (46%) of CTV viewers said they would rather pay less and receive some ads when adding a new streaming service. 82% expect ads on free streaming services. The latest global EY survey of senior media and entertainment executives highlights:
"Over a third of media and entertainment executives say that without reinvention, their company will no longer exist in five years, and they understand the imperative for change."
Opportunity: Embracing Ancillary To Transform the Advertising Value Chain
As the cost of original content creation continues to make headlines, the realities are that many companies need to pull back on the absorbent amounts being paid. Companies like Warner Media cut costs by canceling doubtful completed or midway projects to make room for surefire wins like the release of the Barbie movie, talk of the new Harry Potter and D.C. Universe, by D.C. Comics. All are heading to streaming about 45 days after the cinematic release. What isn't talked about enough are the opportunities for ancillary strategies to become a larger part of the core business model. As we have heard from streaming service executives, true shoppable streaming TV can become the new differentiator and the third alternative to streaming monetization as we know it.
With $100 billion in ad spend expected to go to Retail Media Networks by 2026, similarly, "Fade's Third-Alternative" can help drive far-reaching implications for advertisers, agencies, ad technology, and brands by leveraging streaming T.V. content with in-video discovery and purchase directly to viewers living rooms. Over time, a substantial number of impressions could be tied to SKU-level sales, ultimately changing how product placement, brand integration, and advertising are leveraged and measured for CPM and non-CPM revenues.
Challenge 3: Measurement
The industry is faced with lack of measurement from streaming. With the media and device fragmentation in streaming, data silos, lack of standardization, data integration, and data privacy are among the challenges of measurement in the streaming industry. Most streaming services and streaming device manufacturers all have their own methods of measurement. In addition, it is hard to guarantee that consumers will watch an ad. They may get up to use the restroom or chat with friends on a second device. As a result, it's increasingly difficult for advertisers to gain a clear and comprehensive picture of ad and brand integration campaign performance or to track metrics such as attribution.
Opportunity: Unifying Full-Funnel Measurement
Fade Technology solutions help address this challenge with an in-video unified shopping cart without the need to scan a QR code for each item shown. It provides a single sync from TV-to-mobile that sends items across content viewed to a viewers mobile upon demand. It reduces fragmentation by allowing a consistent way of measuring and reporting with interoperability across content types, devices, and services. Service platforms and brands can gain deeper insights into preferences, viewer engagement, and intent patterns in cohorts of individual viewers in the room.
The complex challenges caused by streaming market fragmentation will continue to evolve and expand as more entrants come to market. In-house solutions will lack the interoperability the industry needs to operate in a customer-first mindset. We have highlighted potential opportunities to address them for streaming services, but the current business models require an overhaul by the media industry. Partnerships with technology providers have become more critical than ever. Our final thought, EY, reveals that a major challenge for media companies is the conflicting pressure to deliver today, while planning and investing for tomorrow and long-term innovation.
About Fade Technology
Fade Technology is an agnostic white-labeled infrastructure for discovery and purchase on streaming T.V. helping to maximize programming and advertising investments with an in-video Discover-and-Buy®, Discover More®, and the 10 F.T. Living Room Experience® for SVOD, AVOD, FAST, and hybrid streaming services. Fade is a neutral party and offers streamers and businesses greater flexibility to leverage negotiations that increase revenue and viewer attention in a hyper-competitive streaming landscape. Fade is a minority women-owned business, Techstars, and Comcast-backed portfolio company. To learn more, say hello at fade.technology.