To the relief of parents everywhere, Disney+ launches today. Joe Wood, Strategy Director of Spark Foundry looks at people’s approach to sharing subscription on demand (SVoD) and other streaming services, as well as the implications of new entrants to the market for advertisers.
Unless you’ve been living under a rock for the past few months, you’ll know that today is the launch of the much anticipated Disney+ streaming service. The platform will feature each of the much loved Disney movies, as well as all Star Wars, Marvel, Pixar and even National Geographic content. As we enter a period where people are likely to be spending more time at home, a new entrant into the subscription video on demand (VoD) market may receive a particularly warm welcome…
As the country’s schools have closed and children have been told to stay at home, some parents have chosen to ‘pre-order’ the service, knowing that they will need to provide round-the-clock entertainment and distraction for their young ones. Where this particular need state is concerned, Disney+’s entry into the market will most likely also be helped by the nature of the content that will feature on the platform. The brand’s long-held association with the optimistic, the aspirational and the simply feel-good, may prove itself to be the perfect tonic for the uncertain, anxious, time we find ourselves in.
However, when we look at the subscription VoD market more broadly, Disney (along with other fledgling services) may face more of a challenge — subscription saturation. According to Mintel, in late 2019, 8% of UK consumers said they would be interested in subscribing to the new service. Whilst this represents a solid base for the service, over the medium and long-term, Disney+ will need to woo some of the 72% of UK consumers who claimed not to be interested in subscribing to another VoD service, at the end of 2019. In order to grow the platform long-term, penetration beyond the ‘interested’ 8% will be essential.
To achieve this could be a tricky sell and require something of a try-before-you-buy mechanic. One of the ways that this is likely to occur may be somewhat ‘unofficial’. Yes, log-in sharing. This behaviour is already commonplace — Netflix have cited it as an obstacle to growth they wish to address — and the likelihood is that the entrance into the market of Disney+, amongst others, is going to drive proliferation. In a study conducted by Magid in the USA, 35% of Millennials share passwords for streaming services. That figure is 19% for Generation X subscribers and 13% for Boomers.
Some may call this part of the ‘sharing economy’, others will label it piracy. Given the statistics above, it’s likely most consumers would consider the act of log-in sharing to form part of the ‘sharing economy’. Examples of this are emerging across a range of sectors; car sharing company, Turo, allows people to let out their car to other people in their neighbourhood; Fon, allows people to share their Wi-Fi connection in exchange for access to the connections of other users; and Wardrobe allows people to share luxury, designer or vintage clothing. Consumers’ uptake of services like Disney+, and the way they choose to access them, promises to show us something of consumers’ mind-set towards ownership and the sharing economy more broadly.
We have seen our ‘need to own things’ decline since the 1980s (Foresight Factory); more specifically, we can see that the ‘need’ decreased amongst Millennials, Gen X and Baby Boomers, from 2016-2019. This ‘need’ tends to wane further in times of economic uncertainty or hardship, so it is not unreasonable to hypothesise that the trend may be accelerated over the coming year.
So, what are the implications for brands and advertisers?
Challenges for targeting: If, as the data suggests, we see an increase in log-in sharing, advertisers that use log-in data to categorise a consumer may see the reliability of this targeting decline. The implication of this reaches beyond SVoD services, to other channels — audio, news, potentially gaming. In these cases, additional data will need to be layered on top of log-in data to re-establish a user’s identity. For example, the contextual data may be used to infer gender or age.
Opportunities for reach: Considering that the Mintel data above suggests that we’re moving towards a point of subscription saturation, over the year ahead, we may see certain SVoD providers experiment with ad-funded models to broaden their user base. Whilst there is debate about the value of ad-funded VoD services (a Prime customer is worth 4.6x as much to Amazon than a non-Prime one, and Amazon’s revenue equals only c. 5% of total revenue), we are unlikely to see this from Disney+ at this stage. Other players may consider ad-funded options, opening a new opportunity for brands looking to reach consumers in their living rooms.
Changes to distribution strategies: in sectors where we see attitudes to ownership change [and the sharing economy], brands may consider their distribution strategies. A brand could stand to benefit by establishing platforms that facilitate the sharing or loaning of that brand’s goods. This would help increase the ‘market value’ of the given product, as it may offer customers a means of recouping the value of original purchase. For example, could Jeep create a platform for customers to loan out their cars to other drivers who need a bigger car for the day? Could Black & Decker front the same community for power tools? Here, brand and consumer benefit; consumers, a small income stream; brands, the opportunity to drive trial.
Whatever the future holds for Disney+, streaming services represent a barometer for a broader consumer behaviour, as they negotiate the notion of ownership. The behaviours we see here and the responses of brands, like Disney, will hold lessons for businesses way beyond the living room.