What the Highs and Lows of Streaming Mean for Subscription Services
Everyday consumers — particularly younger, higher-spending generations — mostly experience subscription services through video streaming. Netflix, Disney+, Hulu, and HBOMax, to name a few, are some of the most popular platforms on the planet, taking in billions of dollars between them in recurring revenue from casual fans to rabid viewers of some of the best-rated TV and movies.
Though these enormous brands may seem like they have little in common with more niche subscription apps, these big earners struggle to reach the same goals everyone else in the space is trying to accomplish — retaining customers and driving long-term value (LTV). They need to produce regular content, market to their audience, entice them to be active users of their platforms, and above all else inspire enough loyalty to warrant subscription renewal at the end of every year.
As the Mount Rushmore of streamers grows new heads, each major player feels increasing competitive pressure, creating greater strains on retention and more voracious demand for bingeable shows and films. To understand the implications of the streaming wars, and what it means to the rest of the subscription service world, let’s take a deep dive into one recent example that personifies the cutthroat battle for content supremacy and, more importantly, how to keep viewers’ attention.
Netflix’s Demise, Disney+’s Rise
From humble beginnings as Blockbuster’s scrappy digital rival, Netflix grew consistently on the backs of original programming and strategic licensing deals to form a streaming powerhouse that went relatively unmatched for years. Though Hulu and HBOMax’s predecessor HBONow offered some variety to a streaming audience, few could seriously step in to meet it.
Fast forward to 2022, and the content landscape has shifted and split dramatically. As more and more services pop up and take their original IP in-house (a la HBOMax’s parent company Warner Bros. did with “Friends,” a huge asset originally in the Netflix library), Netflix saw their steady streamer count start to take a hit. Its market value dipped more than $50 billion as 200,000 users fled the service during the first three months of 2022 alone. After revenue highs driven by new users from COVID-19 shelter-in-place viewing, Netflix came crashing back down to earth in a more options-heavy streaming landscape.
The first assessment might lead you to think that the COVID-related numbers were a momentary bubble of success for Netflix, and the same sudden plummet could have been seen across any major streamer. But for the relatively new Disney+, the exact opposite proved to be true. In the same period of time, they collected nearly eight million new subscribers, riding on the strength of its iron grip on massive, fan-favorite IPs like Marvel, Star Wars, and Pixar. In the same first quarter, HBOMax showed sustained growth with an additional three million new users — also buoyed by household-name content from DC Comics and the “Harry Potter” series, to name a couple.
It seems that the problem is inherent to Netflix and its content. But while Disney+’s big moment seems like cause for celebration, the subscription service is just as susceptible to losses as Netflix, particularly in regards to ballooning production costs. They’re on track to spend a mammoth $32 billion on streaming in 2022 alone, while Netflix’s arguable biggest hit “Stranger Things” reportedly cost $30 million an episode for its nine-part fourth season (i.e. about $270 million for one season of one show).
In response, both Netflix and Disney+ are introducing the long-discussed ad-supported models to their platforms, a method used across numerous other subscription services (streamers included) but otherwise avoided by these two giants until now. As a way to entice lower-paying users and generate additional revenue streams (or push away existing users with higher costs), this is a financial decision that could help undo high costs and recent losses. But in doing so, these giants will be relenting to a model that’s historically frowned upon by users.
The Big Subscription App Takeaways
The streaming wars are obviously ripe with drama and breaking news, but what do all these massive maneuvers mean for other subscription businesses? More than anything, and universal to every subscription service, businesses need to place enormous value on content and engagement to maintain subscribers.
Developing consistent, varied content calendars with strong offerings to keep users interested is the heart of retention, giving each customer a reason to open an app every day and stay engaged. Without it, knowledgeable consumers will quickly swap out if better options are available.
Additionally, subscription sub-categories that are less niche (like streaming) demand a killer advantage — why you, and not the other guy down the street? For Disney+, that edge is their aforementioned historically beloved IPs, taking box office gold and turning it into consistent streaming magic. To that end, subscription apps need to have a clear vision of their special offerings that other brands can’t replicate or take away and lean into it as much as possible.
The final takeaway has to do with how these giants handle their transition into the ad-supported model. When (not if) Disney+ and Netflix go through with the new ad-supported structure, they will face backlash if they don’t approach the change tactfully and with consumer concerns about access top of mind. This applies across subscription apps — customers appreciate stable, consistent payments and companies understand that as a key component of creating brand trust and loyalty. When payment changes shake things up, everyday customers could respond negatively, even causing them to drop off altogether.
Clearly, not all subscription apps operate exactly like streaming services, particularly at the high level of Netflix or Disney+. But no matter what, a consumer-facing subscription needs to give customers a reason to come back. The key is and has always been providing new, engaging content to demonstrate not just immediate but long-term value to customers — so that they in turn can provide it back to the business through their consistent renewal. At the end of the day, investing in retention means investing in content, and the brands that survive are the ones that make sure it’s a priority.