By Jalal Jassoma, agency partnership lead at MBC Media Solutions (MMS), the commercial arm of MBC Group
We’ve all witnessed the recent changes and developments the video on demand (VoD) industry has been experiencing.
The aftermath of the pandemic, followed by ongoing international events, macroeconomic factors and industry-specific changes are putting pressure on VoD providers to reassess their business strategies.
It is now clear, more than ever, that these companies must evolve and acclimatise to the changes caused by this global climate, as well as other factors.
Here are some of the trends, threats, and opportunities that I predict will lie ahead as they set forth to overcome these challenges.
Shift in content consumption
In the last couple of years, we’ve seen many new platforms enter the market, such as HBO Max, Peacock, Discovery+, AMC+, Binge, Allblk and WeTV+ to name a few, over and above the established OSN+ and Starzplay.
With so many players, and due to the economic global situation, users are going to have to pick between these providers in terms of subscription first and foremost, and viewership time for the ad-supported VoDs.
On average, the UAE subscribes to no more than 2.5 paid content services per household (versus about 3 in the US). This means that users must continuously evaluate their subscription-based on content quality, size of library, overall utility and, of course, price.
Another consideration that content providers may face is the increase in ‘Streaming Cyclers’, are users who sign up to binge watch their favourite shows, only to cancel until they see something new. These consumers are expensive to garner as they require heavy advertising to inform them of the new shows, and therefore have a relatively low customer lifetime value (CLV).
This can pose a new challenge for providers who will have to come up with solutions to retain their users and keep them loyal to their platform.
Shift in business models
Increased competition, weakening loyalty and streaming cyclers are probably going to hinder the ability for players to project their revenues and growth, resulting in a need to diversify revenue streams (especially those whose business model solely relies on subscriptions).
While one might think that economic uncertainty could result in people choosing to stay in and so invest more in home entertainment, the opposite is true according to research conducted by Kantar, which showed a different reality.
“I need to save money” as a reason for cancelling streaming service subscriptions increased by 24 per cent in the US and by 59 per cent in the UK from 2021 to 2022. At the same time, a positive change in consumers’ attitudes is observed towards watching ads in exchange for lower subscription fees. Actions in our region may be slightly different, but the macroeconomic events do have a certain universal impact across markets.
In response to that, we can predict that VoD services will need to find ways to diversify their revenue streams.
An increase in the reliance on an ad-supported model could be the way that they might do that. In addition, VoD services might also adopt a lower-funnel approach where they sell exclusive merchandise to
their subscribers directly from their streaming services.
Content providers may also seek to collaborate more with brands. We have already started to see brand integration on platforms like Shahid and Prime video but can expect to see this more on Netflix, and potentially Disney+ and Apple TV+ as they look for additional revenue opportunities.
Piracy: the problem that won’t go away
With many VoD platforms offering their services for a fee, and due to the increase in exclusive content by these platforms, which is often geo-restricted and not available in every country, there are now more pirated content aggregators offering everything for free – and this is expected to continue to increase.
Research done by Kearny suggests that although 27 million households across MENA have access to pay TV services, fewer than 7 million are paying for those services.
Piracy platforms are getting a free ride, while those generating content carry all the risk. The former also are expanding their content pool and are even making their offering more appealing to viewers in terms of user experience (UX), which is a fundamental threat for platforms that are constantly working on increasing their subscribers and hence revenue.
We are therefore more likely to see broadcasters and content providers join forces to combat piracy. MBC Group is the latest member of the Alliance of Creativity and Entertainment (ACE), the growing coalition dedicated to combat piracy around the world.
Brand marketing will continue to pay off
While the rush to cut advertising spending is understandable, in times of global economic unrest we’ve seen evidence to support that during downturns marketers who continue to invest in brand advertising come out stronger.
Marketers already know the importance of continuous presence, especially after Covid-19, which was a great learning lesson. It proved that businesses that increased their marketing focus on brand activity during that period are now seeing the benefits, and those changing gears in the next two quarters are experiencing lifts in recognition, familiarity and trust.
This is because they focused on gaining excess share of voice, which enhances connections with customers by focusing on the tone of their messaging. This builds mental availability for these brands, while others go dark.
Having said that, balance will be the key to achieving stability in marketing performance. Splitting budgets between performance and brand equity will be how businesses will successfully navigate the choppy marketing waters of 2023.
