How Will the Dust Settle in Streaming after 2023?

By Laura Wu, Head of Strategy & Operations, Beachfront

It seems like every day there is a new streaming service popping up, some subscription-based, some ad-supported, and some hybrid. This begs the question: are there too many, and how will it all shake out?

Here is what the industry might see over the next 12 months:

Bundling Reemerges.

According to a recent survey by Ipsos and NPR, 69% of consumers said there are too many streaming services. Over the last couple of years, nearly every media property realized they had to get into streaming to keep pace with audiences — or risk being left behind in the shift to OTT. This has led to an oversaturated market with hefty subscription fees that viewers likely can’t sustain in the long run.

As a result, we’ve now entered the era of bundling. Free ad-supported streaming television (or FAST) platforms are bringing cable-like channel aggregation to CTV, and have been on a meteoric rise of late. Roku and Tubi, for example, will host a FAST channel programmed by Warner Brothers Discovery. On the subscription-side, Disney already offers bundles for Hulu, Disney+, and ESPN+. Paramount is folding Showtime into Paramount+. And Warner Brothers Discovery will launch a new combined service for HBO Max and Discovery+ this year.

Many more services have and will continue to join forces to give customers an easy, one-stop offering that fills all their viewing needs. Given that content is expensive to produce and subscription fatigue is setting in, streaming is already headed toward bundling, bringing back cable nostalgia of one bill for everything.

Consumers Gain More Choice.

As the streaming ecosystem matures, it has become harder for services to continue to grow and retain customers. To remain competitive and meet consumers where they are, many services are now going through the exercise of determining and right-sizing their value.

For example, Netflix recently said that they are evaluating multiple ad-supported tiers. This is a good indication that they’re likely trying to find the optimal approach to maximizing average revenue per user (ARPU) while balancing ad loads and subscription fees. Will they maintain just one ad-supported tier, or expand into multiple? This is just one example of how streamers are diversifying their plans and models due to the evolving landscape; others might include:

  • SVOD vs. AVOD options.
  • Different pay tiers for different ad loads.
  • Different ad viewing preferences; for example, watching two minutes of ads at the beginning or 30-to-60 second pods midstream.

For streamers to seamlessly tackle these expansions, however, there is a need for more TV-centric advertising technology in CTV. Shifting to ad-supported in general can come with pitfalls. And the nature of SVOD programming doesn’t always translate well to AVOD. Many shows created for subscription-based services don’t have natural ad breaks built in, or have embedded brand placements that might make things like true competitive separation difficult.

As streamers chart an amended course in what has become a saturated market, we can expect consumers to benefit as more options are made available – but it won’t be without some bumps along the way if the right tech isn’t deployed.

Media Buyers’ Shift to CTV Accelerates.

The shift in ad spend from linear TV to CTV has been well-documented over the past two years. A survey conducted by the IAB, for example, revealed that 76% of media buyers view CTV as a “must-by,” with 73% expecting to fund increases in CTV by shifting spend away from linear TV.

While the shift of dollars has been gradual over the past few years, it will be interesting to see how the current macroeconomic environment impacts the balance of spend between linear and CTV. How will linear commitments fare at this year’s upfronts, given CTV’s rise to prominence? Will media buyers hold back on bulky upfront commitments to remain flexible, and instead shift to CTV and scatter in the back of the year?

The next few months in particular will be very telling for advertising in both CTV and traditional linear TV. Macroeconomic conditions will clash with what is usually a period of frenzied TV media buying this Spring, and the resulting outcomes will likely have lasting impacts on the industry.

2023 is Already Shaping Up to Be a Pivotal Year in Streaming.

If we look back at the evolution of streaming and how far it’s come in a relatively short period of time, we can expect a frenetic flurry of activity and some major shake-ups in 2023. Most of the big players who were going to enter the ad-supported space have already done it.

Now, the focus will be on partnerships, as well as the launch of new business models and expanded offerings. Regardless of how it plays out, viewers will likely get more choice and control over what they pay for, which is ultimately good for the industry in the long run.