S07E02: Game of Streams (Start with the customer experience)
Our Media Solution Specialist, Magnus Svensson, is sharing his reflections on the online streaming industry in this post. This is part of a monthly series so make sure to follow us here if you do not want to miss an episode.
Competition is harder than ever to attract the eyeballs of the viewers. At the same time, it is becoming clear that streaming video will not be as profitable as the traditional pay TV business. When Netflix entered the streaming market, it disrupted an over-priced pay TV market. With new technology and a new business model, Netflix offered a better service offering at a lower price. With the success of Netflix and the increased cord-cutting all other media companies, some reluctantly, jumped on the streaming technology.
Today, Netflix is the only major subscription streaming company reporting significant profits. Warner Bros. Discovery is trying to adapt the costs against the revenues and reported reduced losses on its direct-to-consumer operations, with cost savings leading to a $500 million improvement in EBITDA loss. And most companies, including Netflix, experiment with business models such as subscriptions, advertising, or hybrid models. Cost savings, increased pricing, and advertising are all efforts to compensate for the fact that streaming video will not be the new golden egg.
Apart from great content (which still might be king), a major reason for Netflix’s success is that their service comes with quality and features that now have become the expected level for a video service. High-quality video and audio. Easy to navigate user interface with attractive posters and trailers. And, even if not perfect, good content discovery guiding the users to new movies and shows to watch and creates the stickiness that is required today.
So whatever cost savings, efficiency measures, and new business models by the media companies, quality should not be compromised. To quote Steve Jobs, “You’ve got to start with the customer experience and work backward for the technology”.
Quality, quality, and quality
To attract new viewers and keep viewers engaged you need to deliver quality video and audio. The fact that you distribute the service for free to the viewers, through advertising, is not an excuse to deliver low quality. Too many of the so-calledFAST platforms and channels deliver poor video quality. With the increased competition also in the free TV space, quality is very important. The viewers, and in the FAST case the advertisers, will prioritize high-quality video delivery. A poor-quality experience will be perceived as a cheap service.
High quality does not equal 4K and HDR and it does not mean that you need to deliver high bitrates that drive cost in storage and distribution. But you need to ensure that what you deliver is good. Not all content is the same and using the same standard bitrate ladder for all content is in many cases not optimal. By analyzing the content and tuning your encoding and bitrate ladders, the perceived quality could increase a lot at the same, and sometimes lower, bitrate. Saving costs and increasing quality.
Next to video quality, the service must deliver persistently with no buffering and low start-up time. Less disruption will lead to fewer calls to service desk and lower churn. Focus on stability and resilience will also save costs in the long run.
Guide the viewer!
Even a stable service with high-quality video must be able to guide the viewer to more content and more time spent in the service. The base for all content discovery lies in the quality of the metadata. The next layer will be the user behavior data, the viewing patterns of your users. By combining user behavior data with metadata to find similar content, you could use attractive posters and trailers to make the user stay or come back. A dynamic user experience that feels personalized is essential to keep viewers engaged.
As stated, multiple times in this Game of Streams series, playlists might be the best content discovery tool. Most successful services of today are based on some kind of flow. TikTok, YouTube Shorts, and Instagram/Facebook reels are all flows of videos. A video service could contain playlists or flows of videos as one way to discover new content. Or just a curated lean-back experience for the viewers that prefer.
The takeaway is that regardless of the business model and type of service, quality should not be compromised.
To watch out for the coming months…
Maybe not in the coming months, but sports broadcast and streaming will go through a transition. Driven by the major television networks and lately also by the big tech companies, the content rights for sports have increased deal after deal. However, a change is on the horizon. At some point, the viewer will not the bill any longer and reach might be more valuable than a lucrative distribution contract. We will see, and already see, new business models and new ways of distribution. More about this in a coming episode.
Magnus Svensson is a Media Solution Specialist and partner at Eyevinn Technology. Eyevinn Technology is the leading independent consulting company specializing in video technology and media distribution.