How much of the value of content comes from the flexibility to consume it? How much of the value of content comes from the flexibility to consume it?

Authors
John Harrison

EY Americas Media & Entertainment Leader

Transformative leader with a passion for media and entertainment. Identifying the opportunities afforded by convergence and disruption. Executing strategies to succeed in a fast-moving market.

Martyn Whistler

EY Global Technology Sector Lead Analyst

Keen observer of all things technology. Storyteller. Avid reader. Bluff traditionalist who is impatient for the future. Fan of sports, occasionally sporty. Fan of the arts, rarely arty.

Adrian Baschnonga

EY Global Telecommunications Lead Analyst

Lead Analyst with deep sector knowledge in technology, media and telecom, gained in professional services and business intelligence environments.

8 minute read 30 Jun 2021

Households have increased their adoption and use of media and content over the past year, but the media industry faces some key challenges. 

In brief
  • More than a third of households choose streaming as the first option for TV and film watching.
  • Fifty-five percent of consumers now trust more than just traditional news sources to provide accurate information.

Streaming services are firmly established in the media mix of most households, and the pandemic has accelerated further uptake. Existing subscribers have added extra options while new customers have signed up. This growth means streaming is now the primary way to watch TV and films for 37% of households.   

Many streaming providers responded quickly to the pandemic by adding more content, features and functionality. Consequently, 53% of consumers believe streaming platforms coped well during the pandemic, with just 9% disagreeing. These positive perceptions are reflected in high satisfaction levels and comparatively low likelihood of churn. In the coming months, as patterns of content consumption continue to evolve, service providers will look to capitalize by expanding into new markets and genres, investing in more content and evolving their offer and pricing models.

Network reliability experiences during the pandemic by household structure and location chart

Streaming services outperform cable and pay-TV offerings

When asked to choose their top three reasons that households take streaming services, it is the attractive monthly price (64%) that trumps content factors such as breadth of library (40%) or exclusivity (30%). There is variability by market, which is accounted for on underlying industry dynamics, but overall streaming services are universally seen as better value than pay-TV. 

Therein lies the dilemma for pay-TV. Not only is it seen to be less value for money, but as households increase their spending on streaming services, 33% admit they are willing to make room in their budgets by scaling back their pay-TV spend. It hints strongly at further cord-shaving and cord-cutting among consumers.  

All surveyed markets see greater value from streaming services than from pay-tv chart

Consumers are overwhelmed by the wealth of content choice

The multitude of devices, services, apps and platforms that consumers can access leaves them with unprecedented content choices. Keeping track of what is important to them is a challenge, particularly for younger groups. Thirty-nine percent of those aged 18–24 find it difficult to track their favorite content such as films and TV programs. 

At one level, consumers see they have a responsibility to address this issue with 25% actively interested in reducing the number of music- and video-streaming platforms they engage with. However, greater onus is placed on service providers to respond. Thirty-six percent of households believe their pay-TV or streaming providers could improve the relevance of content they recommend. There is an increasing expectation not only for more intelligent recommendation engines but more intuitive user interfaces. This potentially signals a growing role for content and service aggregators to meet these household needs.  

Household attitudes to accessing their favourite content chart

Advertising continues to add further levels of frustration to the content experience 

One of the fundamental revenue streams underpinning much of the media industry is advertising, and yet audiences are increasingly put off by it. Online advertising presents unique concerns since consumers are wary of sharing their personal data and are increasingly conditioned toward ad-free content offerings that rely on one-off or subscription payments.

If their willingness to pay to avoid advertising is an appropriate proxy for dissatisfaction, it is the younger audiences that seem most put off by advertising. Thirty-six percent of respondents say they are more willing to put up with ads on broadcast television than before or during streamed programs — with younger groups top-scoring. Media companies are investing heavily in advertising technology solutions that are intended to deliver improved ad yields and higher revenue, but they must better balance this with providing a satisfying user experience. 

Consumer willingness to pay a premium to avoid advertising chart

Addressing concerns about fake news requires a collaborative, industry-led solution

Consumers are constantly widening the range of sources they trust for news. A majority (55%) say they now trust more than just traditional news sources to provide accurate information, a percentage that is higher still for younger age groups. This positivity about the proliferation of trusted sources comes with additional risks. Not only does it shine a light on consumer awareness of what can be trusted but also importantly on what cannot be.

Although households are prepared to trust a range of news sources, there is growing concern about the pervasiveness of fake news and its negative impact on society. Among consumers, there is a widespread belief that more needs to be done to control and regulate fake news. That greater action needs to be taken by social media platforms to self-regulate is matched by similar expectations on government and regulators.

This is more than a challenge for specific companies; it is one that needs to be solved by collaboration across the industry ecosystem. The scale and complexity of the problem calls for policy coordination and targeted investment in solutions. The latter is a technology opportunity for providers. Emerging technologies have an important role to play, from artificial intelligence (AI)-based fact-checking to widespread deployment of blockchain’s immutable ledger to ensure provenance.

Consumer perceptions about where responsibility lies in combating fake news chart

Interest in gaming is growing

The imposition of lockdown rules was an adrenaline shot for many digital services in the home, and gaming was no exception. The foundations were well set, with 50% of households already owning at least one gaming console. During lockdown, this popular pastime across all markets was taken up by a further 5% to 10% of respondents who tried online gaming for the first time. 

The rise in uptake reflects the wider interest in gaming of all sorts. For example, the popularity of eSports has continued to grow despite the embargo on marquee, showcase and arena events. Whether participating in or watching, 41% of those aged 18–24 years old are interested in competitive gaming competitions and eSports. What is perhaps more surprising, but speaks to the size of the opportunity, is that eSports’ popularity is matched by those aged 25–34 years old (40%).

For pay-TV providers, this presents some clear opportunities. For content providers, eSports offers a route to new types of content and audience engagement. Consumer electronics manufacturers will welcome new forms of gaming demand and there is also good news for connectivity providers, given that 32% of households believe high-quality, low-latency broadband is important for online gaming.

Adoption of online gaming during COVID-19

What does this all mean for content providers?

1. Capitalize on the heightened demand for content

Strong demand for content during the pandemic, allied to positive actions taken by streaming providers during the crisis, has created significant consumer goodwill. Taking advantage of the post-pandemic opportunity requires a careful mix of investment in content but also customer experience. Both need to be firmly rooted in addressing consumer desires and mitigating their pain points.

2. Understand the roles that value plays in decision-making

In an increasingly fragmented and competitive content industry, the costs of content and customer acquisition are escalating. Against this backdrop, content providers should be cognizant of the role that value plays in consumer decision-making and therefore consider the trade-off for their investment strategy. Careful consideration must be given to the elasticity of pricing models as well as the interplay between price and service quality. Raising prices to invest in better content and bigger libraries might seem attractive and logical, but is there a long-term trade-off that might not be worth making?

3.  Put the customer and not the advertiser at the heart of the advertising strategy

The user experience is a key driver of the adoption of services and, for many, advertising is seen as the enemy of a seamless user experience. Nonetheless, it remains an integral and significant source of revenue that underpins business models. Services without advertising are changing consumer expectations. It is therefore incumbent on those that value advertising to think smarter about how to integrate and position it within their platforms.

4. Tackle fake news as an industry issue

The proliferation of fake news has a tangible impact on individuals, society and business. For example, the undermining of 5G threatens adoption rates and subsequent innovation. Consumers expect widespread action from all stakeholders and believe not enough is currently being done. Bouncing back and forth between platforms and regulators is not a route to a solution, instead the industry needs to come together to find holistic answers to these questions. Companies need to find the intersections and points of agreement where they can work together to extol the virtues of new technologies rather than always competing against each other.

Summary

At its peak, COVID-19 resulted in stay-in-place or lockdown requirements in almost every household in our survey. Inevitably, that left many looking at their entertainment options with a subsequent increase in the adoption and usage of media and content services. Streaming providers responded by widening the breadth of their content offering and extending their geographic footprint. At the same time, new services launched. By consensus, streaming services have coped well with the crisis, but complacency is a risk. The wider media industry faces challenges around managing the experience for consumers while also evolving business models and maintaining trust.

About this article

Authors
John Harrison

EY Americas Media & Entertainment Leader

Transformative leader with a passion for media and entertainment. Identifying the opportunities afforded by convergence and disruption. Executing strategies to succeed in a fast-moving market.

Martyn Whistler

EY Global Technology Sector Lead Analyst

Keen observer of all things technology. Storyteller. Avid reader. Bluff traditionalist who is impatient for the future. Fan of sports, occasionally sporty. Fan of the arts, rarely arty.

Adrian Baschnonga

EY Global Telecommunications Lead Analyst

Lead Analyst with deep sector knowledge in technology, media and telecom, gained in professional services and business intelligence environments.