Standalone streaming services versus aggregators: Which model will win?

Standalone streaming services versus aggregators: Which model will win?In October 2017, CBS shared that its standalone streaming service, CBS All Access, has seen a record number of new subscribers in a single week. And according to the company, Trekkies are responsible for the bump: the new series “Star Trek Discovery” was a hit among fans, with exclusive access to Discovery for subscribers driving a record-breaking number of signups.

“Consumer response to the launch of ‘Star Trek: Discovery’ has been tremendous,” Marc DeBevoise, president of CBS Interactive, revealed. “The buildup to the show’s premiere led us to a record-setting month, week and ultimately day of sign-ups.”

The show, which was already renewed for a second season, is the latest win for CBS All Access, which has become an unlikely success in the competitive streaming service market. Since its launch in late 2014, the subscription streaming service has expanded to a userbase of more than one million users. The company is now planning on taking CBS All Access global.

Mapping the path forward in the streaming war

The headline-grabbing success of CBS All Access raises an important question: would the same approach work for other media companies?

It’s a timely and high-stakes question given that more companies are now working on their own subscription video-on-demand offerings. Early in 2017, Disney said it would stop licensing its content to Netflix to launch its own streaming service in 2019. Similarly, ESPN, which Disney also owns, plans to launch a streaming app by next year.

But not all media companies are putting their bets on standalone streaming services. Just last year, for instance, 20th Century Fox Television Distribution agreed to add nearly 3,000 more episodes of popular TV shows to Hulu. The multi-year deal includes the popular drama “This is Us” and classics like “The Mary Tyler Moore Show.”

On the other hand, HBO and Cinemax are both available on Amazon Channels, making shows like “Game of Thrones” and “Silicon Valley” available to Amazon Prime members for an additional subscription fee. Not to be outdone, Netflix has a licensing agreement with companies like ABC Studios, delivering popular broadcast programs like “Grey’s Anatomy,” “Scandal” and “Agents of S.H.I.E.L.D.”

It’s not hard to see why many media companies would rather license their content than create their own streaming apps at this time. Establishing a standalone streaming service is an expensive proposition—and winning is hardly guaranteed. Disney, for example, considered buying 21st Century Fox to prepare for its impending battle with Netflix. Established players have already carved their markets, and any company that wants to compete with them will have to invest a significant amount of money just to catch up.

Making this market even more complicated is the fact that the business models emerging are confusing and inconsistent. Some are ad-supported with very low fees. Some, like Netflix, have pricing tiers. Others, like Amazon, have cable-like services that allow consumers to pick and choose the content they want to pay for.

Media companies are also finding themselves competing and partnering with other media organizations, making it very difficult to figure out if you’re making the right decision. For instance, while HBO has a deal with Amazon, it also has its own standalone app. The question of whether you should create your own streaming service, or if you’re better off licensing your content is becoming more complex everyday as companies weigh the pros and cons.

For CBS, Disney and other companies that are seriously contemplating establishing their own apps, a big challenge is convincing consumers to try something new. People may not want to hop around different services to access different content, and they’ve already gotten used to the established players.

Each of these incumbents in the streaming world has something going for it: Netflix has become part of the daily vernacular and is aggressively investing in original content; Amazon offers a wide breadth of choices to consumers and has the money to invest in this space; Hulu just won an Emmy for “The Handmaid’s Tale,” validating its efforts to produce must-watch original content. The pull of streaming services is, in fact, so strong that cable companies, which once considered these services as existential threats, are now warming up to the idea of integrating Netflix and Hulu into their offerings. Competing with these established players will require a compelling brand strategy that will convince people to switch or to add another streaming service to what they’re already using.

Thriving requires listening

As the streaming market matures, a couple of models might become more dominant than others. But, in order to capitalize on the opportunity in front of them, media companies need to invest in market research.

At the very least, companies need to understand consumer expectations, attitudes and preferences when it comes to streaming content. Getting the right pricing model requires insight on the value of streaming services, the customer experience and how the company can meet those expectations. Navigating licensing agreements and establishing the right structure require that companies take a data-driven, consumer-centric approach.

Only time will tell which market models will win the streaming-service war. The companies that have the most compelling content, the right revenue model and the deepest understanding of their audience will be in the best position to succeed, and will, in the words of Star Trek’s Spock, live long and prosper.

Download a sample of our streaming video report, StreamOn, if you would like more information on what streaming providers need to do to win over consumers.

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Janice Anderson

About Janice Anderson

Janice Anderson is a vice president in the Technology Research division of Market Strategies. She has 10 years of quantitative and qualitative research experience among B2B and consumer audiences, helping clients not only understand their target audience but also meaningfully connect with offers that excite and drive loyalty across their product lines. Having been a client-side researcher for Microsoft and American Family Insurance, Janice understands the challenges of driving organizational change and is known for partnering with her clients to create momentum. She earned a bachelor's degree in economics from the University of Wisconsin-Madison. When she’s not happily researching what makes people tick, Janice is looking for the next gadget she can't live without!

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