1. SVOD Churn Is At 20%

A new report has SVOD churn at around 20% for the last two quarters of 2020. While I am always skeptical of studies that claim to know the unknowable (or at least the unreported), the estimable Brett Sappington is behind this one, so I am willing to temporarily suspend my disbelief. 

Besides which, the number sounds about right, which is to say it’s surprising to no one that churn is becoming a problem.

Why It Matters

The SVOD market is all over the place right now, and in a number of different ways. In terms of subscriptions, many of the players are benefitting from deals they’ve struck that give users a free subscription for many months. So Disney-Verizon, Discovery-Verizon, Netflix-T-Mobile, HBO Max-AT&T, and of course Apple-any-Apple-product. (I half expect Apple to give an extra three months of AppleTV+ free to anyone who upgrades their phone’s OS.)

Then there’s the more existential crisis, which is that there’s not a whole lot of difference between the services.

To wit, Disney and Discovery are really the only two with any sort of uniquely identifiable programming. Everyone else is doing some version of HBO circa 2017.

That’s not a bad thing, and as noted here previously, that has largely been what the audience for streaming TV has wanted because the early (and early-ish) adopters were largely the sort of affluent, educated, coastal audiences that HBO was programming for.

Fast-forward to 2021, and a bigger and thus broader audience is now on streaming and they are not likely to appreciate the quirky insider humor of shows like BoJack Horseman and Transparent. Netflix kind of gets that, hence the money they’re spending on Shonda Rhimes and Ryan Murphy, but if everyone now starts making what has been referred to as “expensive NBC”, then there’s still not going to be much differentiation and/or reason to stick with a service or even remember what’s on it.

Churn will be a bigger problem for the five Flixes that offer ad-supported versions and whose customers are going to want assurances that the ads they are buying based on April’s subscriber numbers are going to hit the same number of subscribers come October.

So there’s that, and why the likely outcome of all this churn is that we will see The Great Rebundling, as services try and reduce the uncertainty of month-to-month subscriptions without being the first to take away the very popular ability to have month-to-month subscriptions.

The Great Rebundling will take the form of discounts on yearly subscriptions (already in place for many services), network group bundles (e.g., Disney’s bundle with Disney+, ESPN+ and Hulu), and bundles put together by MVPDs, streaming device OEMs and smart TV OEMs.

And while you’re likely to hear a whole lot of squawking about how horrible the return of the bundle is, back on earth, most consumers are likely to welcome it, as it will be both cheaper and one less thing to worry about.

What You Need To Do About It

If you’re one of the Flixes, think about how you can differentiate yourself from similar services and what you want your service to stand for in the consumer imagination. (Though I would urge you to avoid those reports where you ask people to imagine what your brand would be if it were a person and then write uber-cringey things like “Netflix would be a 30something woman in a blazer and designer jeans with a fashionable but not overly trendy haircut and chunky modern jewelry who enjoys SoulCycle and vegan cooking.”) Because if nothing else, it’s really hard to keep a straight face when you read that.

If you’re not part of the greater Disney or DiscoWarner family, you might also think about what sort of bundle you can offer to counter the fairly robust packages they are going to be offering.

If you’re a consumer, get ready for fewer free options as all of those six-months-for-free offers expire and you need to decide whether you actually want to subscribe. It’s going to be tempting to say yes to all of them, because what’s an extra $4/month, but remember that they do add up in aggregate.

If you’re an advertiser or agency, remember to get some sort of guarantee against churn rates picking up, lest you get caught short.

2. Project OAR Hits 11 Million Addressable Enabled TVs

Vizio’s Project OAR now has 11.2 million TVs that can be called on to accept the dynamically inserted addressable ads it is serving up on linear TV. Those ads are served directly through the aforementioned smart TVs and thus help to greatly expand the market for linear addressable.

Why It Matters

At the recent TV[R]EV Town Hall for our Thought Leaders Circle members, the issue of why addressable has not been adopted as quickly as many in the industry had hoped it would came up, and a theory that had much traction was the notion that many addressable buys still lacked the sort of scale that brands are looking for.

Having 11.2 million TV sets in the arsenal should help change that perception, at least for Project OAR.

OAR’s linear addressable is notable in that it allows networks and advertisers to bypass the MVPDs and insert ads directly into their feeds, which in turn opens up a far greater pool of inventory.

Most all of the leading networks are now a part of OAR, along with the leading ad agencies, as they’ve all realized that linear addressable is something brand marketers are interested in, and networks like AMC, Warner Discovery and Fox are actively selling ad units via OAR. 

This capability will become even more necessary in the years to come as more and more viewers migrate to streaming and we reach a tipping point where brands are using linear to reach those viewers they’re missing on streaming and not the other way around. Having a way to reach those viewers using dynamically inserted linear addressable will then be an even bigger plus.

What You Need To Do About It

If you’re one of the other OEMs, you should consider joining Vizio on Project OAR. There’s strength in numbers and the more scale advertisers can get, the more money they are likely to spend.

That goes double for Roku, which now owns the technology Nielsen developed to allow for dynamic ad insertion on smart TVs. The two technologies together would have a strong argument for advertisers.

If you’re an advertiser, don’t be afraid of addressable. It’s not just for direct response spots, it’s a great way to reach the specific audiences you want to reach and those audiences can be as broad or as targeted as you’d like. In addition to less waste, you’ll get better measurement and accountability, both of which have been in short supply on linear.

If you’re a TV network, continue to push this--it’s the future of linear, in as much as linear has a future, and new features like watermarking will make Project OAR even more valuable.