SVOD Wars: The studio empire strikes back David Mackay.

This week saw the introduction of yet another subscription streaming service into the Australian Reducing content costs market with the launch of Paramount+ (part of Here we see different players seeking to leverage ViacomCBS, which now own Channel 10). their broader media asset bases to wear some of the costs of developing and marketing content. Nine The landscape has changed a lot since I owned Stan can share content across FTA TV and wrote SVOD Wars: A new media hope, 6 years ago. publishing assets; Viacom owned Paramount across We now have a plethora of Subscriber Video on its global assets, including FTA TV Channel 10 in Demand (SVOD) offerings in Australia, including new Australia; Amazon and Apple have their broader offerings introduced by Amazon (Amazon Prime), retail and software assets, and Disney has theme Apple (Apple TV+), Disney (Disney+, Hayu) and parks, cruises and a plethora of other Foxtel (Kayo, Binge). We’ve also seen some entertainment assets. Netflix is seeking to replicate offerings fall by the wayside, including Presto and these models with its forays into merchandise and Quickflix. retail. This allows the cost of content production to be defrayed across a broader range of revenue The fundamentals from the original article still hold generating assets as they can share development in terms of customer growth levers: and marketing costs. • Content – what you can watch • Price – what you pay New and/or cheaper Content • Experience – where and how you access the This is an area still evolving. While content is still a content and how easy it is to navigate key driver of subscription activity there is reluctance to compromise on quality, There is the well-worn What has changed significantly is the competitive route of pursuing lower cost content such as making landscape and what that means for the SVOD reality TV shows but these still have broad appeal. business model. Whereas Netflix was previously SVOD is still focused on audience acquisition over seen as the hopeful winner takes all aggregator, the profitability but as subscriber growth slows for the landscape has become more fragmented with dominant players new types of content are traditional content owners (studios) taking content required. Netflix appears ready to enter the gaming back and coming out with their own SVOD services. market seeking to expand its content In this fragmented environment, it’s no longer a offering. Apple has already gone down this road winner takes all play, it’s how can you build a with Apple Arcade, however it charges a separate sustainable business where you can deliver a fee to Apple TV+ unless you opt for the more pipeline of compelling content at an affordable expensive Apple One bundle. Other providers have development cost. moved into live sports content, such as Paramount+ signing up the A-League and W-League, pitting it in To do so, SVOD players need to defray costs, find competition with Kayo for content. new/cheaper content and find new revenue sources. 1

SVOD Wars: The studio empire strikes back| August 2021 New Revenue Sources

As outlined above, organisations like Amazon, Apple and Disney have other revenue sources beyond their SVOD businesses. Within the SVOD business line, we have also seen new revenue opportunities being explored. Disney has launched premium content where new releases can be purchased/hired over and above the base subscription during the theatrical release period. Apple TV+ and Google Play allow individual purchases as well. Paramount+ has foreshadowed that their sports offerings will include limited advertising. These examples of Transactional Video on Demand (TVOD) and Advertising-supported Video on Demand (AVOD) demonstrate that mixed revenue models are likely to continue.

Who wins?

winner takes all hope of content aggregation hasn’t played out and now providers are facing stiff competition in a congested market. Those with the greatest ability to pull customer growth levers within a sustainable cost structure will win. SVOD was initially seen as a huge win for the consumer with the potential to access premium content at a fraction of existing PayTV options. When a small number of providers dominated the available content, significant savings could be achieved by consumers. With increased fragmentation of content across providers, consumers face the prospect of taking out multiple subscriptions to see their favourite content. In April About SPP 2019, AMPD Research reported the average subscribing household pays A$35.40 per month for Strategic Project Partners is a high impact strategy 1.9 SVOD services. Since then we’ve seen consulting firm. We support organisations on difficult consumers spend more time at home due to COVID strategic and operational challenges. restrictions, and Netflix, Foxtel, Stan, Disney+ and Amazon prime all increased their viewership by at Established in 2005, SPP has delivered successful least 1.5 million in 2020. Consumers are now spoilt outcomes for a broad range of commercial and government sector clients. for choice of content and convenience but the costs of layering subscriptions services are mounting. When we deliver our projects, whether it’s a strategic study or the implementation of large-scale change, we focus on: David Mackay • Strong project management • Clarity of outcome Partner • An obsessive focus on project benefits [email protected] • Robust, fact-based analysis • Simple communication • Bringing experience to bear

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SVOD Wars: The studio empire strikes back| August 2021