Room for everyone? SVOD at the tipping point

Mediatel’s Anne Tucker and Research The Media’s Richard Marks share exclusive new consumer data on SVOD pricing strategies, unveiled at Future of TV Advertising Global

When it comes to SVOD in the UK, Netflix and Amazon Prime have had it pretty much all their own way, but with Apple TV+ and BritBox now launched and Disney+ and other services imminent, the battle for enticing content widens and with it the battle for our wallets. Just how many SVOD services can the market take in terms of price sensitivity. How elastic are people’s wallets?

At the Future Of TV Advertising Global, held in London this week, we unveiled exclusive early data on consumer attitudes to SVOD and the importance of subscription pricing. The data comes from Mediatel’s long-running Connected Screens tracker, based on 1003 adults in UK broadband homes.

Full data will be released via the Mediatel Connected data platform in January, but what does our sneak peak reveal? Is there room for everyone, or is SVOD at the ‘tipping point’?

Currently 38% of UK broadband households have access to Netflix, following a steady increase in its footprint, more than double when we started measuring in 2014. By comparison, Amazon Prime Video is currently in 25% of households, despite having the advantage of being linked to the free delivery option that is so vital to Amazon’s strategy.

Perhaps worryingly for satellite and cable providers, whilst SVOD has up to now largely complemented rather than replaced pay TV, 63% of those with any pay TV or SVOD service do see the latter as a potential money saving alternative, particularly the case for those who only use Netflix: SVOD is enough for them.

Respondents agree that they are currently saving money by subscribing to these VOD services, rather than buying or renting DVDs. And yet their perception is that if you add all their media expenditure together, including all those DVDs they were buying ten years ago, they are paying more in total on media now. [advert position=”left”]

So what about ways of saving money on SVOD? Well around a third of our respondents said that they sometimes get an SVOD subscription tactically – for a short period of time – and then cancel it once they have seen what they want. However, most subscribers have a fair degree of inertia and are too satisfied – or lazy – to change.

A further way of saving money is password sharing, since Netflix and Prime Video allow use of several devices, and Netflix is notoriously tolerant of password sharing as a means of increasing reach and potential new subscribers. 27% of our SVOD users let friends and family outside the home use their password and with a pleasingly logical symmetry, 27% use a password shared from outside the home. Interestingly the figures are pretty similar between Netflix and Prime.

The central issue for the future of SVOD is price sensitivity around the monthly subscription fee itself. There’s only so much money in people’s pockets for these services, so just how much price elasticity is there in the UK market? Some key stats for you:

– 43% of respondents agree that they regularly review how much they are spending on these TV and video services.

– 39% of those with subscriptions to pay TV or SVOD services are actively cutting back on services already

So arguably there is a degree of price awareness and some desire to limit expenditure and in our final set of questions we got even more specific…

When Netflix or Prime subscribers are asked how much they are currently paying in total, the most common answer is between £10 and £19 – i.e. the current actual combined total. Note that this is before the launch of services like Apple TV+ and Disney+. We are adding these to the survey and will watch what impact they have on these figures.

So what is the most people are willing to pay for a single SVOD service? Much has been written about £10 per month being a key threshold and our consumers confirm that. Clearly some will pay more than that, but it is a minority – 63% are only willing to pay £10 or less for a single SVOD service.

Perhaps a note of caution is warranted here as past research shows that interviewees tend to be aware of how these surveys can sometimes work, so can be loath to admit any openness to a price rise, but significantly the answer is near identical for Netflix or Prime subscribers. So £10 seems key.

That expectation around what an SVOD service costs is reflected in the conservative pricing of the newer entrants – Apple TV+ at £4.99 in the UK, Britbox at £5.99 and £6.99 strongly rumoured for Disney+. Presumably all of them realise that, at least initially, they will be a supplementary SVOD service for many.

The question has to be whether advertising-free SVOD services are economically sustainable at a price point of less than 10 pounds or dollars. Will a hybrid model be needed, or is the lack of advertising a key element of the offer in the first place?

Meanwhile just a final thought. As consumers get used to the idea of a subscription economy for media, will the competitive set widen, at least when it comes to competition for your hard-earned money?

With all their subscriptions handily listed on the same bank statement, will people review not just their SVOD subscriptions, but all their media subscriptions: their music streaming, their publications, even their arts or tech subscriptions?

If we are moving from physical to digital, from ownership to access and so to a world of subscriptions, is the price pressure about to get a whole lot heavier?