COVID-19 accelerates streaming challenges as well as demand

By Michelle Wroan

COVID-19 has massively accelerated the demand and subscriber growth in streaming video services. In just one example, Disney+, which launched last November, has already surpassed 60 million subscribers globally, reaching its 2024 goal of 60 to 90 million four years ahead of schedule.

Streaming services are also benefiting from the fact that some high-profile theatrical content is going directly to streaming, as well as the fact that theatrical exclusivity has been reduced to only a few weeks. Assuming new content production resumes safely, the accelerated availability of new content will help streaming services enhance their value proposition to consumers.

Challenges still facing streaming services

Despite their compelling advantages, streaming services face a variety of operational and marketplace challenges.

— Navigation and discovery curtail the user experience: The sheer number of streaming services, for example, is emerging as a growth obstacle as consumers start to experience subscription fatigue. Each service comes with its own log-on and interface, making it complicated for consumers to navigate the supposedly relaxing experience of watching TV.

— Value in aggregators: To address navigation and content-discovery challenges, we expect to see aggregation platforms that, in essence, bundle the offerings of different streaming services on a single interface that serves as an in-home video dashboard. Such a platform would make the streaming experience easier to navigate and could provide a rich source of consumption data that provides additional opportunities for monetization.

— Greater operational complexity: Content providers now offering streaming services must also address a variety of complex operational and business issues. Reaching consumers directly — rather than through third-party distributors — represents a major operational change for content providers that includes establishing new technology infrastructures, billing relationships, customer service functions, and stronger data governance and compliance frameworks. Content providers also need to blend previously separate entities, such as production, distribution and other business units that were traditionally siloed in a B2B environment or performed by external partners.

— Need for performance management systems: Regardless of the business model, deciding what to measure—and how to measure it—is a key operational challenge. Providers should place a high priority on the accuracy of data for reporting, maintaining the integrity of information for billing and customer service, and strict adherence to regulatory expectations. Operations must be well controlled to ensure accuracy, integrity, and compliance.

The bright road ahead for digital media

Looking ahead, ad dollars will continue to concentrate in streaming services, social media platforms, and other digital services. Digital advertising’s enhanced targeting and attribution, automated placement tools, and lower costs offer attractive and compelling advantages over legacy broadcast and print media. Brands and their advertising partners will have to identify the most effective ad mix across channels, audiences, tactics, and messages to maximize results. They also will have to monitor results carefully as the economy re-emerges. Deploying and improving their analytics capabilities will play critical roles in delivering the needed business, customer and marketing attribution intelligence.

The implications of the interlocking changes to the streaming video market, advertising, and content distribution are likely to continue as the U.S. media and entertainment sector adjusts to a new reality, while content production and live entertainment search for ways to return safely to profitable viability.

Michelle Wroan is managing partner of KPMG's Los Angeles office and national media industry lead. For more information or to arrange an interview, please contact Mike Alva.