New SVOD entrants are making a critical mistake

but Disney+ delights?

It would be easy to think that this week the newsletter is streaming heavy. But there are lessons in every piece which apply to the broader world of subscriptions. Investment in content, the approach to user engagement, understanding user behaviour and business model approaches cross industry boundaries. This week we take a look at:

😳Holding users attention

🥰 Delighted Disney subscribers

🎤 YouTube’s impact on the music industry

🤖 An Android or iOS business model

and much more

The war for time: Driving addiction

Apparently the “Aha” moment for YouTube was when they introduced related videos alongside the one you were watching. This drove exponential engagement as users watched one video after another, getting lost down a rabbit hole of content. In this piece Lightshed Partners, a media, technology and telecoms research firm, highlight the critical mistake, they believe, legacy media companies are making - not optimising for engagement. Or as they say not getting users addicted.

The key points they make are:

  • Tech companies deliberately use algorithms, game mechanics and push notifications to capture as much of a users time as possible

  • It is becoming clear that winning time and attention requires very deep pockets (for acquiring content) and you need to be thinking long term

  • Legacy media companies are not optimising for attention - they’re focusing on driving subscriptions and balancing their legacy channels’ profit - this seems harsh, I think things are evolving quickly and legacy companies are always compromised

  • Legacy media are not spending enough on content - if you don’t have enough content it’s hard to drive addiction

  • There are some legacy media hangovers eg no enabling binge watching - I admit I found it hard to understand Disney’s decision to release the Mandalorian episodes weekly

  • Users are being trained by Netflix that they can just go to the platform and eventually they will discover something to watch - the legacy players aren’t as good at this

  • Ad free is superior to streaming with advertising. Lightshed point to the $14.25 ARPU that Netflix achieves in the US and the fact that engagement on the services with advertising is less. I’m not sure this argument holds up, it may be too early to tell and if the with ad streaming services are poor at content recommendation etc then this may be the actual issue

In their summary, Lightshed contrast the approach of tech companies and legacy media companies. Reinforcing the point that the tech companies are using content and technology to drive addiction to their platforms. Read more.

Disney delights

According to Creative Strategies, Disney+ is a hit with customers scoring 793 on their Delight Scale, which attempts to capture the sentiment of a users’ customer experience.

You can see how Disney+ scored in the table above. Some of the questions seem likely to yield a high skewed answer from this particular audience eg “Family friendliness of the content options” not sure how this would make sense if scores were compared across Netflix, Amazon etc.

I’m surprised by the high scores for the user interface and ease of discovering new content. For me Disney+ lags way behind Netflix in the user interface and particularly in content recommendation.

85% Disney+ subscribers felt the price of Disney+ was fair and 87% intended to continue to subscribe, so churn figures should be low. The high Delight Scale does appear to be be translating into action, with 74% of customers actually recommending the service to someone in their social circle.

Viewing the Disney+ Delight Scale score in isolation is mildly interesting, comparing it to Netflix et al would be far more revealing. Read more.

An iOS or Android approach?

According to Prof. Scott Galloway the business world is gravitating towards two approaches to business:
iOS model - where you a pay a premium (usually in the form of a subscription), you get more privacy and you get a refined, quality, controlled solution

or

Android model - where you get the product for free but you, your behaviour or your data are monetised in some way

Most people will either choose or can only afford the Android route. But Galloway believes people are beginning to realise the extent to which they are being monetised and so the iOS / Premium / Subscription service is going to grow in popularity.

It’s a compelling argument, but I wonder whether it has to be that binary? In fact there are examples of hybrid approaches. Even from the maker of Android, Google. YouTube has both an ad supported model and a premium experience through their subscription product - maybe you can have the best of both world’s? Listen to the great Pivot podcast to hear more.

Roku’s rise

I’ve been meaning to make note of Roku’s verticalisation. They have created a strong position as a provider of streaming hardware / software and increasingly content. In their last financial results they noted their US reach of 70 million people and that streaming hours had doubled year over year. They also offer advertisers an audience which had become difficult to reach. With a market cap of around $45 billion they are in a strong position to acquire more content or content companies.

Quick links

Half of Spain pays to stream video according to markets regulator CNMC. The majority (57.7%) are watching short-form content. 9 out of 10 people regularly stream content on their mobile.

YouTube disclosed that it paid music companies, musicians and songwriters more than $4 billion in the prior year. These revenues were made up from a cut of advertising revenues and now, subscription revenues. For context Spotify paid over $5 billion.

Regulating subscriptions - in the US the Federal Trade Commission (FTC) is looking for ways to regulate how subscriptions are offered. This has been prompted by two core complaints 1) negative option marketing, where if you don’t act you’re charged eg a free trial switching automatically to paid and 2) making it way too hard to cancel.

How Instagram works - an open piece from Instagram on how various elements of the platform work. Much of this had been guessed at, but an important reminder for using Instagram as a marketing channel.

Listen 🎧

Jason Calacanis is like Marmite (you either love him or hate him), I swing between the two, but his podcasts are great. This interview with Kayvon Beykpour, Head of Product at Twitter has some great insight into their new subscription products and how they’re looking at developing these out. Twitter has some help here with third party companies creating tools that make using Twitter more efficient - these are likely to become features of Twitter in the future. Listen here.