'Sub-nevers' will alter streaming market with new viewing habits

Huge media companies like Apple and Disney have created a crowded streaming market, with new services from NBC and Warner Media still to come early this year. This increased competition has led to a lot of hand-wringing and questioning. How will these streaming services impact cable subscribers? Just how many OTT subscriptions are viewers willing to pay for? Can these services stand up to the demands of millions of viewers without crashing, and will viewers stick around if they can't?

These questions are tied to dramatic shifts in viewer behavior. Subscription streaming services (SVoDs) are banking that they can attract a customer base that includes cable customers, cord-cutters and a growing number of cord-nevers, or those who have never subscribed to traditional pay-TV service. But cord-nevers are not the end of the viewer evolutionary line. A market flooded with options, password sharing, free content and ad-supported video-on-demand (AVoD) is giving rise to a new breed, the "subscription-never." Ultimately, it's this group of consumers that will have a sweeping impact on the streaming market in the long term.

Programming influences behavior
Cord-cutting and cord-shaving are established phenomena that cable operators and streaming services are well aware of. Even the cord-never trend is several years old at this point, and this population continues growing steadily. Cord-nevers accounted for 12% of the US population in 2018, up 2% from the year before. More importantly, this audience's average annual household income is growing – up 27% to $52,800 – signaling that the decision to avoid traditional pay-TV is not solely influenced by finances.

The median cord-never consumer is 33 years old. Research shows that members of that age group who are considering signing up for pay-TV are often influenced by programming: Some 29% are likely to subscribe because it's easier to watch/find shows, and 23% will do so because pay-TV has better access to the shows they want to watch.

That thinking raises a new question: What if audiences could access the shows they want without paying? That's where the subscription-never trend comes in.

One of the content strategists in our office counts herself as a cord-never, but her habits probably put her much closer to a "sub-never." She uses a shared family login for Netflix. She subscribes to an OTT service periodically, to watch a season of a particular show, and then quickly cancels. This behavior is more akin to paying for the content than subscribing to the service. For example, she was one of the millions who subscribed to Disney+ when it launched, but she canceled as soon as she finished watching its hit show, The Mandalorian. She essentially paid $6.99 to rent the show. Meanwhile, her primary viewing channel is YouTube, which is free with ads.

It's hard to calculate just how big the subscription-never audience is. But viewing habits of younger generations can give us a sense of how large it could be in the future.

The average member of Gen Z spends 3.4 hours a day online watching videos, and 62% check YouTube daily, indicating that they are clearly not turned off by the ads. Younger viewers who never thought about cable TV in the first place aren't even thinking about paying monthly for Netflix, Disney+ or Apple TV+.

Streaming providers will look to add value
This shift is akin to the days of cable TV versus broadcast TV. Both platforms had advertising, but viewers didn't have to pay for the broadcast channels that came to them free over the air. They got great content too! Shows like Friends, Seinfeld and the US version of The Office originated on broadcast TV and are currently among the most popular shows on streaming platforms.

The increase in viewers choosing free content over a paid subscription is essentially a generation of viewers opting for bunny ears over a cable box. That could be catastrophic for a streaming industry that is growing more competitive. But it could also create an opportunity for services to court a new audience, via free or low-cost plans that align with this group's behaviors.

More than 60% of streamers watch AVoD content,, indicating a massive audience willing to sit through ads in exchange for saving money on content. Most streaming services have treated their ad-supported offerings as funnels toward a paid subscription, but that line of thinking is outdated.

Some services are already reading the writing on the wall. NBC's Peacock will offer an ad-supported model free to all who want it. The ad-supported platform Tubi has more than 20 million users with free accounts. Amazon doesn't have an ad-supported model, but it does have a value add: Prime Video is included with an Amazon Prime membership, and with that comes free two-day shipping and other benefits.

In the year to come, we can expect all of the streaming services, major and minor, to explore new ways to add users, even if they are not traditional paid subscribers. We'll likely see a variety of different models that go beyond ad-supported video. For example, Netflix has low-cost mobile-only plans in India and Malaysia, but it will have to go further. Analysts are already pushing Netflix to adopt an ad-supported model, based on an expectation that the company will lose 10 million subscribers next year if it doesn't.

All of these platforms are trying to grow viewer counts and drive viewer engagement. It doesn't make sense to watch a chunk of your subscriber base walk away because they don’t want to or can't pay a monthly subscription. Value-added and ad-supported models are the path of the future for streaming, especially for services that want to engage viewers and attract eyeballs.

Editor's note: Want to learn more about all these trends? In a special online event next month that was originally tied to the now-postponed NAB Show, Light Reading will tackle this subject. Entitled "Taking Streaming Video to the Next Level," the 90-minute webinar will take place on Monday, April 20. Please stay tuned for more details.

— Dan Taitz, President and COO, Penthera

Phil Harvey 3/16/2020 | 2:53:48 PM
Re: 2 other things that might push things along It's kind of weird to define a market by something that people don't do. But, here's a question: If someone watches YouTube and pays for a premium subscription (no ads + music), are they counted as a sub-never, even though they're subscribing to something to enable content viewing experience, but not directly paying for content itself?
brooks7 3/16/2020 | 12:18:40 PM
2 other things that might push things along I see 1 current and 1 future thing change that might impact what is going on.

I am still a corded customer.  The reason I am is to watch live sports.  Of course, there is essentially no live sports at the moment.  I am sure there are others like me who might start cord shaving because of the lack of sports content.  Sucks to be ESPN at the moment.

The other thing that I think is a future is what is going to happen to the paywall services over time.  It seems to me that Netflix might want to make more money out of "Orange is the New Black".  Few, if any, subscriptions will come to Netflix because of this series, especially as it ages.  It seems to me that at some point Netflix will syndicate the series to somebody and it will have a new revenue life.  I think at this point all heck breaks loose in our definitions.


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