We see streamed content in two distinct categories:
Streaming video: Moving pictures on a screen, watched with or without accompanying audio, and delivered on any device via internet connection. This includes both professionally produced, premium content and user generated content, of all lengths.
Streaming Audio: sound, transmitted on any device, via an internet connection. This includes but is not limited to music and talk.
The streamed content landscape in Australia is nearing maturity, with more consumers choosing to pay to unlock on-demand access to both audio and video content.
Whilst consumption of over the top (OTT) services has become normalised in recent years, such services remain a discretionary part of consumer budgets. If cost pressures on Australian households continue to build, subscription services - especially those held in addition to Netflix - are likely to become prime candidates for cost cutting.
In such an environment, we expect the current growth of broadcaster video-on-demand services (BVOD) to continue, leveraging the willingness of consumers to pay with their time (consuming brand advertising in exchange for content) and not their money.
Advertising revenue in advertising supported video-on-demand and, in particular, BVOD is expected to grow strongly over the next five years. This will be driven by greater penetration of smart televisions with OTT television capability embedded, as well as other internet enabled hardware devices, such as Apple TV. Software developments are an additional driver, with free-to-air (FTA) networks investing in platform user experience in chase Netflix’s high watermark.
Another driver is the increasing quality of the viewing experience of BVOD services, who have made headway to closing the usability gap between themselves and Netflix. In an economic environment with minimal inflation, flat-lined wage and household expenditure growth, advertiser-supported business models may become an increasingly important option for consumers, therefore driving growth of BVOD platforms.
“While it's arguable that all Australian content delivers some kind of cultural return, the areas where we specifically invest to promote cultural value are under significant pressure. Australian documentary, drama, kids and indigenous stories are where we must continue to invest as a community.”
A single revenue stream from either advertisers or subscribers is the business model of choice for new streaming entrants in Australia, especially in video streaming. This firmly splits the advertiser on demand platforms and subscription on-demand platforms, both of which have require distinct content, and marketing strategies to achieve growth.
For audio specifically, Google and Amazon, among others offer a free streaming tier, but with advertisements playing at varying intervals (known as advertising supported audio-on-demand).
Foxtel’s subscription model bucks this trend, with two revenue streams: customers and advertisers. Spotify and a number of other audio providers also allow people to pay with either their time or money with both subscription or advertising funded options. Hulu in the United States has introduced a blended business model where, in addition to an ad-free subscription tier, Hulu offers a low-cost, advertising supported tier, where advertising breaks are capped at 90 seconds.1
Illustrative not exhaustive
A key strategic lever for subscription video and audio-on-demand platforms is their capacity to build broad catalogues where subscribers are won and retained based on the depth and variety of the platform’s content offering. Ratings become a secondary objective to maintaining the right mix of genres, talent and acquired and commissioned content to keep subscribers engaged.
As video subscription platforms increasingly become the dominant platform for professionally produced drama, FTA networks will need to lean more heavily on traditional ratings drivers of live sports, news and reality television - with Netflix already tinkering with these formats2 to compete.
"Growth will always come if you focus on having eighteen strong teams, playing the best game in the world."
Australians are spoilt for choice when it comes to SVOD services. The range of services available is set to continue growing over the forecast period. Launches from international heavy hitters Apple and Disney are rumoured. In the small Australian market, this level of competition will likely prompt further consolidation. Presto, a home-grown joint venture between Seven Network and Foxtel, has been an early casualty.3
The dominance of Netflix cannot be ignored, with the majority of consumers taking a ‘Netflix and _______’ approach to spending their SVOD dollars. Less clear is who will win the coming battles for the second SVOD service: will Stan, Foxtel Now, Kayo or Amazon Prime give way to Disney or Apple TV+?
The key question to consider if consumers’ purchase decisions are being driven by:
Australia has seen a number of entrants to the streamed audio market such as Amazon Music Unlimited, Apple Music, Deezer, Google Play Music Unlimited, iHeartRadio, Spotify and Youtube Music, although some, such as Pandora, have come and gone. For those with a subscriber business model, price isn’t a differentiator with all current audio streaming services priced around the same amount, the only exception being the more premium Tidal. For the audio streaming players within the Australian landscape, the question remains - how will these service providers differentiate to retain and grow subscribers and listeners?
Diversifying may involve supporting and distributing more local content, via local and emerging Australian artists. Exclusive content, such as songs, albums and music videos can retain and entice new subscribers. A diversified audio catalogue that doesn’t just support music is another strategy. To this end, Spotify have expanded their services to include podcasts acquiring two strategic companies as part of their quest to embed the podcast offering to their listeners.
Illustrative not exhaustive
Podcasts are growing in popularity and content creators, with journalist Hedley Thomas winning the Gold Walkley in 2018 for a true crime investigation podcast. In the United States, the podcast Dirty John was so successful that it inspired a screen adaptation.5 Google will also soon include podcasts in their search results, which should further raise awareness and consumption of the medium.6
Awareness of podcasts has reached 90 percent of Australians, however only 6 in 10 have actually tried listening.7 Once trial is achieved, for those that continue to listen, podcasting becomes an established habit8 where they listen to more titles, for more episodes and for a greater length of time. A heightened awareness of screen time is also a positive driver for an increase in ear time. Despite this exciting exponential growth though, it is off a small base, and the infrastructure to support a sophisticated, mass appeal product for significant advertisers in the Australian market remains a challenge.
An advertising supported business model is not without its challenges, particularly in the streaming audio space. Podcasts for mass market brands (who often have the largest advertising budgets) are not a compelling offer because of their reach compared to other channels, including television and OOH. For a reactive or time-bound message, such as a special or sale, the fact that podcasts are accessible at any time to download, even years after an episode has been published remains, means there is potential wastage in the channel. The channel is also not truly addressible: while podcast content may target a narrow audience (cricket fans or book lovers), you can’t target advertising on a one-to-one basis, as you can on Facebook, YouTube and other platforms and channels.
This is an exciting time to be an on-demand content provider. The capacity, speed and reduced latency of internet access is improving, and there is a growing number of internet-enabled devices available in every household. This opportunity has been seized upon by a growing list of audio and video streaming businesses, who will compete for the finite resources of consumers’ time and discretionary money.
“The popularity of podcasts has led audio’s resurgence - there’s a real cool factor”
Compete on content. With no price leaders in the streaming audio category, new subscribers will be won on the desirability and exclusivity of a platform’s content. The genres of music and talk is where the battle will be fought.
Know your audience. The pace of change in the streaming audio-on-demand landscape has never been so rapid, and the analytical capabilities so precise. Those that not only capture and measure data, but strategically use it to design products and services will reap rewards.
Curation and discovery. With audio-on-demand subscribers having millions of options to listen to, choice paralysis can be limiting to the discovery of new content, which drives engagement. Human and artificial curation of content to mood, occasion, or genre will remain essential.
Don’t compete on range. Netflix has outpaced the market in quality content, platform usability and original programming.
Find your niche. How can you curate a content offering that distinguishes itself from Netflix to justify the subscription cost to consumers, and has enough depth to engage viewers month after month? This might be demographic-focused (men, women, kids) or content-focused (Australian sports, Australian drama, comedy).
Don’t rely on tentpole programming. Having one major must-see exclusive show is insufficient to maintain loyalty and will leave providers open to being switched out for a competitor service employing similar tactics.
Quality control. Exceptional movie quality production values that takes advantage of HDTV and 4K capabilities can enhance the viewing experience. NBN and 5G will also bolster the user experience of downloading content and streaming on the go.
The importance of a content pipeline. With the democratisation of distribution platforms, the power and influence of production companies is growing. Strong, strategic relationships that allow creativity and talent to be nurtured and supported is integral to ensuring quality supply.
Balance acquired and commissioned content. As more and more international media companies go directly to Australian consumers with their own services (such as CBS), local services including Stan and Foxtel will need to fill the hole that this content loss creates. The cost to produce and market content of a similar high quality will be a challenge.
1 'Hulu puts a cap on ad loads: Streamer insists on 90-seconds (or less) ad loads', Garett Sloane, Ad Age, www.adage.com, 29 March 2019
2 'Netflix is reportedly working on a news show to rival ’60 Minutes’', Chloe Aiello, CNBC, www.cnbc.com, 13 March 2018
3 'Presto to shut down in January after Seven West Media sells to Foxtel', Lucy Battersby, www.smh.com.au, 4 October 2016
4 'Walkley Awards: Hedley Thomas, Slade Gibson win 2018 Gold Walkley for true crime podcast', ABC News, www.abc.net.au, 23 November 2018
5 'You heard it right, it's headed for the screen', The Australian, www.theaustralian.com.au, 27 April 2019
6 ‘100 things Google announced this week’, Tegan Jones, www.gizmodo.com.au, 10 May 2019
7 'ABC Podcast Research 2018: Audience data & insights', ABC, www.abc.net.au, 17 October 2018
8 'ABC Podcast Research 2018: Audience data & insights', ABC, www.abc.net.au, 17 October 2018