Consumer Preferences & Consumption Patterns Chart a Course to a New TV Frontier
The paid television industry is at an inflection point, mirroring the music industry around the birth of the Dot Com Era. In a previous article, we explored some of the factors that brought the industry to this point. We focused on the shift in the consumer buying decision process as well as the consolidation of content ownership. But as we look to the future, can we follow consumer preferences and consumption patterns to a path forward for innovative brands?
The road ahead for traditional paid television networks may be paved by free ad-supported television platforms, otherwise known as FAST. Platforms like The Roku Channel, Pluto TV, Xumo TV, and more provide free access to hundreds of channels worth of content, ranging from syndicated sitcoms to live sports. In essence, these platforms have taken the concept of traditional over-the-air broadcasting (think of the old fashioned bunny ear antennas) to the Internet. Whereas in the past broadcasters were limited by the frequencies available, the Internet provides a virtually limitless platform. For mid-sized and smaller paid television programmers, these new platforms represent a distribution boon.
Tapping into Consumer Trends
The benefits of FAST go beyond the accessibility of the platforms. These platforms have gained momentum because their developers have wizened to prevailing consumer trends, and programmers would do well to follow suit. Ultimately, marketers must always follow consumer trends to find success, creating products and delivering content that consumers want. Using preference data, we can see that, in response to the monetization of online streaming, consumers have displayed a willingness to put up with advertising in order to access content for free.
Hulu, which offers both ad-supported and ad-free subscription plans, has reported that the overwhelming majority of subscribers are willing to accept ads in their content in exchange for a lower monthly fee, to the tune of 70% of users on ad-supported plans. Furthermore, this has allowed Hulu to make money hand over fist by generating a reported $1.5B in ad revenue in 2018. In addition to Hulu, Roku has relied on its FAST platform, The Roku Channel, to help reach its target of breaking $1B in revenue in 2019.
Speaking to Digiday, Roku senior vice president Scott Rosenburg explained how their decision to focus on The Roku Channel came down to following consumer preferences and trends, “The reason we went hard into pure free, ad-supported content was because we were listening to our users, and one of the most important terms that people searched for on our platform was the availability of free content.” Larger corporate acquisitions, like Viacom’s early 2019 cash purchase of Pluto TV, also demonstrates industry belief in the viability of this new breed of platform.
Capitalizing on the FAST Wave
For programmers moving forward, the keys to capitalizing early on this new wave of Internet television consumption will come in the forms of consumer education and targeting. Marketers will need to segment and target their digitally literate audiences in order to deliver a message based on education and awareness. While early adopters have already engaged, there are still massive segments of the market that have not learned about FAST platforms, let alone become accustomed to using them for their television consumption. This presents an opportunity for first-movers to align themselves with the cutting edge of consumer trends and preferences in order to deliver the content people want, while also growing their brand as more accessible and compelling than competing networks. In a dynamic and tumultuous industry, this may be the way forward.