Online video services – pricing and payment models
12 June 2019
This week we continue last week’s discussion on pricing and payment models of online video services. During the spring of 2019, ad-funded online video services (AVOD) are seeing a significant upswing across the Nordics. In Mediavision’s analysis of the Nordic TV & video market, we conclude that AVOD revenues have increased by +20% YOY in Denmark, Norway and Sweden. Comparatively, a similar digitalization of the ad market can be seen outside the Nordics as well. In the UK online advertising accounted for 57% of the total ad spend (£23.6 billion) in 2018 and is expected to increase further in the coming years.
Looking at paid services, new details regarding Warner Media’s coming SVOD service were recently revealed. The yet to be named AT&T-owned SVOD service, is slated to see its US release in early 2020. The service will bundle together HBO Now and Cinemax with content from Warner Bros. Recent news show that the new SVOD service will be sold as one primary service at one price, reportedly higher than Netflix and more than twice the price of Disney+. The question is whether Warner Media will be able to compete at such a high price level in a fierce market where penetration is stabilizing and growth is likely to be driven mainly by the stacking of subscriptions.
However, reports also state that Warner’s upcoming SVOD service may be complemented by a less expensive, ad-supported version after the premium service has been released. This hybrid pay/ad business model is currently used by for example Hulu in the US. As John Stankey (CEO of AT&T’s media businesses) puts it, the ambition is to create a service that can compete for ads with Google and for subscribers with Netflix. In a Nordic context, this would follow the example of Denmark’s TV2 Play that offers both a full price service without ads, and a lower priced ad-supported alternative. It remains to be seen if this is the way forward in order to cope with Netflix’ dominance and the simultaneous price pressure from Disney+ (Newsletter June 5th).
The struggle with finding viable payment models is not only exclusive to the online video industry, but also a challenge to other digital media markets. The Dutch start-up Blendle, the “iTunes of news”, is changing its business model. The service is leaving micropayments behind to lean solely on subscriptions. Blendle is a digital newspaper and magazine service where users get access to a wide range of magazines and newspapers, for a monthly fee. Until now, customers were also able to pay per article. Lack of revenues from micropayments, and the search for more predictable revenue streams are described as the main reasons for focusing solely on subscriptions.
Who will win the Nordic streaming war?
Competition on the Nordic streaming market is ramping up with several new services about to launch. Content investments are escalating and only partly offset by price increases. In the US, Netflix recently announced +13-18% on subscription fees.
Mediavision press releases:
10 million streaming subscriptions in the Nordics
Streaming video continues to grow rapidly in the Nordics, Mediavision concludes in its recently published analysis on the Nordic TV and video market. An increasing number of consumers subscribe […].
Mediavision in the news:
- IAB Sveriges seminarium Online Video: June, 19, Stockholm, Sweden
*Events where Mediavision will be presenting