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Data for subscriptions podcast - Episode #2

The Future of the Streaming Video Industry Is Usage


Stephen Hateley

Stephen Hateley
Head of Product Marketing at DigitalRoute

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Episode description

Video-on-demand is transforming. Usage-based billing is the future

The growth of the video-on-demand industry has stagnated in the past year or so. Video subscription services like Netflix are struggling to gain new subscribers and even maintain their existing customer base. How can these companies keep growing and sustaining their revenue stream?

That’s what we are trying to answer in this episode of The Data for Subscriptions podcast. Stephen Hateley, Head of Product Marketing at DigitalRoute, joins our host Behdad to discuss how companies like Amazon Prime, iTunes, and AppleTV can manage subscriber churn and reinvigorate their growth in the current SVOD landscape.


What are some of the modalities or delivery modes we see currently in the video on demand industry?

We are all familiar with the most common or the most popular approach, the subscription video on demand (SVOD), or what Netflix is doing. When you talk about video-on-demand, everyone sort of jumps to this. The subscription video on demand or SVOD is largely geared towards customers who want to avoid broadcast TV and the ads and are willing to pay a flat rate for it.

In this episode, host Behdad Banian speaks with Stephen Hateley about new modalities and trends we can expect in SVOD.  

What challenges are we seeing in the industry?

Well for starters, the industry got too comfortable, and now we have way too many players. Subscribers have just too many options to get their entertainment and can easily switch from one to another.

On top of this, many are starting to realize how much they are spending on subscriptions every month. They’re facing a subscription fatigue; paying for too many options but being unable to use all of them.

The realization is prompting many to cut down on their subscription. And of course, we have the password-sharing problem that VOD companies have faced from the very beginning. Many are starting to realize that a significant chunk of their viewers is not paying for it.

How are companies like Netflix trying to grow their user base and at the same time remain profitable in this economy?

Netflix is, quite controversially, adding an ad-based tier, which only time will if it will be successful because it really can go either way.

On one hand, you’ve got people who think they don’t want to watch ads at all, who see that as a selling point of video-on-demand.

On the other hand, you have viewers who won’t mind watching a couple of ads if it means getting a cheap subscription. And most surveys suggest that the split is really fifty-fifty between these groups.

Of course, it’s not just Netflix, other companies are looking into more modalities as well.

How can streaming platforms solve the problem of subscriber churn?

Well, let’s say I’m the CEO of a video-on-demand company that prides itself on subscription-only content and our customer and revenue growth has stalled. An ad-based tier is not an option, because we’d lose more customers than we’d gain.

So, we need to optimize the revenue per view and create an offering, maybe in a pay-as-you-view or pay-as-you-binge format. But at the same time, we’ll have to offer something more for our existing subscriber base.

We’ll also have to build better relationships with content providers as well. For this we need a granular understanding of our customers, create a light model or a cheap subscription to entice people to join the platform, like a freemium or freemium+ model, build an enhanced experience for premium subscribers, and motivate content providers to help grow our library with smoother payments and settlements.