Rebuilding or rebundling? The changing TV landscape

Has the streaming bubble burst?

After steady growth during the 2010’s and a boost in popularity during pandemic induced lockdowns, video streaming services have very much become the future of TV. But are they now starting to look like the past?

It’s well established that the SVOD (subscription video on demand) market has gone from strength to strength in recent years; penetration of paid for SVOD services rose from a fifth of UK households in 2015 to two thirds in 2023, and it’s estimated that we’ll be spending more money on these services than pay TV by next year. But despite this, there’s evidence that growth may be slowing, with British households cutting more than 2m subscriptions in 2022, and 2023 marking the first time we saw a fall in SVOD penetration, of 2.94%.

Rising costs all round

Over the last few years, as lockdowns lifted, our spending habits have shifted – while at the same time the cost of living has increased. With an increasing number of services offering more (exclusive) content than ever before, stacking services has become the norm and SVOD users now pay for at least two services a month on average.

But the need for an increasing number of services to access the full breadth of content desired means a higher monthly spend more akin to the pay TV packages of old, exacerbated by rising subscription prices and a crackdown on account sharing by Netflix, with Disney set to follow suit. But unlike Pay TV contracts, SVOD subscriptions are easy to cancel and so churn is becoming a more significant issue for many services as viewers pick and mix their services depending on their must-watch list at the time.

Competition therefore is fierce, with services required to have regular new content to draw subscribers in, as well as a rich catalogue of shows to keep them there. This is evident in the growing importance of sports rights, as SVOD services seek new to ways to differentiate themselves with unmissable content while Pay TV providers look to retain their advantage. The fact that Netflix’s loss of Friends to HBO Max in several countries made global headlines is indicative of the importance killer content has for a platform and how hotly contested (and expensive!) rights can be.

The return of adverts and free TV

The cost of acquiring and commissioning content for each service as they attempt to gain a competitive edge means the challenge to sustain growth and ensure profitability is greater than ever. Despite the ad-free viewing experience previously being one of SVOD services biggest USPs, they are now welcoming advertisers with open arms, with ad-supported tiers offered by Netflix, Disney+ and Prime Video and rumours circulating that Apple TV+ might be next, particularly after recent hikes in the cost of its subscription.

The move to ad-supported models not only allows these services to provide a cheaper service, thereby accessing a new wave of subscribers, but also raise the cost of its premium ad-free tier, resulting in greater ARPU (average revenue per user) and greater profitability.

In parallel to this, we’ve seen the introduction and expansion of FAST (free ad-supported streaming TV) channels, recently launched by the likes of UKTV and offered across services such as Rakuten, Pluto TV and Samsung TV Plus. It’s estimated that around 16% of British households access FAST channels regularly, with their popularity likely to see a boost following the launch of Freely, a platform developed by the UK’s biggest broadcasters, including BBC, ITV and Channel 4.

Frustrating fragmentation

While more services with a range of price plans and the (re)introduction of free TV offers more choice to viewers, choice isn’t necessarily always a good thing. Content is becoming increasingly fragmented across services and channels, resulting in the need for more services than ever before to access the full breadth of content desired.

And more services and more choice can actually make it harder to find something to watch, with almost half of internet users across 30 countries agree they feel overwhelmed by the number of services they have access to in 2024 (45%), up from 36% in 2023. In previous studies, we’ve seen these feelings of overwhelm often result in habitual navigation habits that are hard to break, meaning viewers miss out on exposure to new content and don’t get the full value from their repertoire of services and channels.

The great rebundling

In an attempt to deliver better value, ease consumer frustrations and reduce churn by streamlining the viewing experience, service aggregation is gaining momentum. It’s becoming increasingly common to be able to add streaming services into pay TV packages, master brands are starting to offer service bundles at a discounted price (such as the Disney, ESPN Hulu bundle in the US), and services such as Amazon Prime Video and Google TV+ now offer the ability to add services to their platforms. Subscriptions are also being offered at a discounted rate as part of a wider range of bundles with telco and utility contracts, often alongside competitors, with recent projections suggesting that 25% of all video streaming subscriptions will have been sold through telco partnerships alone by 2028.

The effect? Combined access to a range of content from different providers for one monthly fee – just as pay TV packages have been offering for decades.

Coming full circle

It’s clear the TV landscape is changing, but what does the future hold? Will reaggregation in the sector result in greater rigidity for viewers, with the need to lock in to bigger, longer, more expensive contracts to secure the best value? And is this a trade-off that will feel worthwhile if it reduces the cognitive burden of constantly hunting for content? Or will greater competition between services for content and viewer spend see the sector contract again with significant mergers and acquisitions, such as the rumoured takeover of Paramount by Sony Pictures?

Another (perhaps unlikely) alternative future could see services embrace viewers’ desire for value through more flexible models like those seen in other markets, such as the Nordics, where services can be swapped in and out of a long-standing contract depending on what viewers want to watch at any one time. Far from reducing churn, this would effectively encourage it – but could this opportunity for a regular slice of guaranteed revenue rival the high stakes strategy of long-term retention?

Whichever way it goes, it’s clear that the TV landscape is changing. Streaming continues to be the future of TV, but in many ways the future looks set to replicate the past, with streaming services embracing business models and distribution strategies that look strikingly like those they set out to displace over a decade ago.