SVOD, Pay TV Facing 'Headwinds': AVOD, FAST Feeling 'Tailwinds': TiVo

Video streaming reached a “turning point” in Q2, said Scott Maddux, TiVo vice president-content strategy and business, on a webcast last week, noting the number of video streaming services consumers watch now averages 9.9. “That’s a lot of services to navigate,” Maddux said. “The burden on the consumer is getting pretty heavy in terms of remembering where their shows are and how to find the next big thing."

The rising number of services is becoming a challenge for viewers to manage as they approach “subscription fatigue,” Maddux said, noting all the major media brands have launched subscription services. With inflation on the rise, consumers are facing “significant economic headwinds, “and people are just starting to top out,” he said: "Subscriptions are adding up.” Of the nearly 10 average services respondents said they watched in Q2, 6.7 were paid vs. 6.5 in Q4, while nonpaid services grew from an average 2.4 to 3.1, said the report.

Overall video viewing slipped in Q2 to 4.3 hours a day from 4.5 in Q4 '21, said the report released last week, with falloffs in pay-TV, subscription VOD and virtual MVPD viewing, but a rise in ad-supported VOD (AVOD) and free ad-supported TV (FAST) consumption. About 35% of respondents watched pay TV in Q2, down from 38% six months earlier; 27% watched SVOD, down from 31%; virtual MVPD viewership slipped a point, while FAST and AVOD viewing was up 12 points to 22%, said the report.

That “sets the stage for some fundamental shifts not just in the consumer viewing and consumption patterns but the industry as a whole,” Maddux said. Subscription services are facing “headwinds,” he said, while AVOD and FAST channels “are feeling tailwinds.”

Users’ perception of AVOD and FAST content quality has gone up, said TiVo executives, and the metadata available for both is approaching that of traditional content. Free content is becoming “inherently more discoverable now," said Jon Heim, senior director-product management, and that’s helping people get more out of watching nonpaid services.

Personalization is important for free services where viewers are less invested than if they subscribe to a service, said Heim, creating a churn risk. Nonsubscription services are "easier to get in and out of,” he said, so it’s important that services recommend other shows a user might like “before the viewer bails.” Services should interact with new users in the first week to understand what content they like and “mitigate dissonance,” he said.

Media companies are using AVOD and FAST at the free end to “onboard new viewers” that they can then pitch on their “plus” offerings, Maddux said. "If you watch Pluto for 10 minutes, believe me, you’re going to see ads for Paramount+: They’re using that to upsell,” he said. “They’re monetizing at both ends of the spectrum” from advertising and subscriptions, he said.

Netflix and Disney getting into the AVOD space -- joining free services from other media companies that also have SVOD services -- will help raise the quality level of free offerings, a trend the industry is already seeing, Maddux noted. Top media companies are putting “tremendous investment in the AVOD and FAST side of the business, and that means quality content,” he said, noting more “blockbuster” content. First-run movies used to go into a 12-to-18-month distribution window; now they're showing up in AVOD and FAST services “within six-12 months,” he said: “That goes a long way toward driving viewership.”

A fifth of customers surveyed for the report said they planned to buy a smart TV within the next six months, with 47% of those saying they’re replacing a TV and 53% adding a TV to another location. While 53% said they're skeptical of privacy or data-sharing policies, about three-fourths of prospective smart TV buyers are willing to opt in and share data to get a more personalized video entertainment experience, led by millennials (65%) and Generation Z (57%), TiVo said. Fariba Zamaniyan, Xperi vice president-advanced media and advertising, credited the rise of AVOD viewing to growing awareness driven by promotions and advertising.