Streaming Companies Have a PR Problem

Consumers’ discontent with CTV rises as streaming subscription costs increase, leading to cancellations and a demand for a la carte options. At the same time, the industry faces a PR problem in explaining the challenges of rising production and licensing costs.

Like millions of consumers everywhere during the pandemic, I beefed up my number of streaming subscriptions. Binging on whole seasons of shows became the other national pastime we could indulge in at relatively little cost. But that’s changed, and understandably so. The cost of content has increased, and streaming services need to respond. Consumers don’t fully appreciate that reality.

When Amazon Prime announced at the beginning of the year that its subscribers would need to pay an extra $2.99 to continue an ad-free experience, consumers grumbling about ever-increasing subscription costs began earnestly. 

It’s worth exploring their complaints so everyone with a stake in the CTV industry can address them head-on. In many ways, the situation parallels what digital publishers went through as they lost revenue from print and needed to fund more of their operations with digital revenue. Consumers believe the internet is free and want free or low-cost access to content and apps without ads. That’s not reasonable, of course, and publishers have had to painstakingly explain to readers why ad blockers hurt their ability to create content.

This is why I believe streaming companies have a PR problem and that they need to explain to consumers how advertising helps them overcome challenges and ultimately feed the content-creation process. Let’s look at some of those challenges.

The End of Peak TV

One of the critical challenges is the general attitude that less new and compelling content is available now. I don’t hear this from consumers but from the press itself. I can’t even count the number of times the New York Times has declared that Peak TV is over. Just this past week, John Koblin, who reported on the Emmys, wrote “Congrats, and Goodbye to Peak TV,” noting that studios and streaming giants are cutting back on new scripted TV shows for adults. Since 2019, the number of new scripted TV shows has declined by 40%; in the second half of 2023 alone, new shows fell by 24%.

Then critic Peter Biskind, whose guest essay, “How Hollywood Lost its Nerve,” appeared this week, wrote that today’s streaming companies are chasing the same consumers to build the biggest possible audiences. But large audiences require bland content not to offend anyone, which is the antithesis of what made Peak TV so innovative, with its focus on the antihero. “Today, beleaguered programming executives are hampered by cost-cutting and cowed by market upheavals. Almost no one is looking to be a disrupter anymore,” he said.

The Times isn’t the only publication lamenting the end of Peak TV. Hollywood Reporter, the Wall Street Journal, and many others have also said that the golden age of TV that began with “The Sopranos” and ended with “Succession” is now behind us. 

Many Facets of Consumer Discontent

According to the digital ad-tech industry, consumers are delighted with CTV. A year ago, eMarketer predicted that consumers’ time watching CTV would grow from one hour a day to just over two hours sometime this year. Then, Hollywood writers and actors went on strike, and streaming services began raising their rates. But it’s worth asking: Does that increase in consumption minutes mean that consumers are happy?

We know that consumers are canceling their subscriptions. Streaming companies are working hard to find ways to retain them, including offering low-cost AVOD subscription models and bundles with competitive streaming services. Most articles say consumers cancel services to lower their monthly outlay, but that’s not the whole picture. I say this because I interviewed several consumers nationwide about the number of services they subscribe to and how they feel about their available options.

First and foremost, many of the consumers I interviewed resent paying for multiple services. “I only have one streaming service outside of Xfinity. It drives me nuts to pay so much for “cable” and still need additional services,” Peggy W, a retired Silicon Valley marketer, told me. 

Andrea D., a flight attendant, agrees. “The internet connection drives me insane. It costs $104 a month just to subscribe to a streaming service.” 

Another concern is the number of subscriptions required to watch what content they find interesting. To wit: This past January 13th, the Miami Dolphins played the Kansas City Chiefs. The game was the first-ever exclusively streamed playoff game. Consumers who aren’t Peacock subscribers were out of luck, which angered legions of NFL fans

Not surprisingly, consumers are finding creative ways to watch TV while simultaneously cutting their subscription costs. “For any shows that might be on a service we don’t have, we pay for the month, binge, then cancel,” said Elizabeth W, a marketer who lives with her husband and two young children. I heard this a lot from consumers and people from within the industry.

Rick P., a psychologist in NYC, said he wishes all TV and movies could be “purchased a la carte.” He and his wife find it more cost-effective to buy whole seasons of shows they want to watch from Amazon Prime. This approach should concern streaming companies because consumers like Rick no longer “graze” content libraries searching for other shows and series to watch and recommend. Rick told me that he and his wife have cut back on the amount of TV they now watch, relying solely on recommendations from friends or colleagues rather than discovering them on their own.

Numerous consumers told me they select their subscriptions based on individual shows. “I have Netflix, but I definitely don’t get my money’s worth. I watch The Crown once a week,” Karen R. said. She and her husband maintain the subscription because they share the password with their college-age daughter, who shares it with her friends. “Sometimes, when I want to watch The Crown, I can’t because too many people use my account. I have no idea who they are, but a quick message to my daughter, and 15 minutes later, we’re in business.”

All of the consumers I interviewed felt strongly about the presence of ads in paid subscriptions. As Rick said, “If I pay, I shouldn’t see ads.” For many, the SOVD model was an essential appeal of CTV, and now it feels like streaming platforms are rescinding a promise. There is some history here. The desire for an ad-free experience is one of the reasons many consumers opted to ditch cable. This is a particularly challenging problem for streaming companies that offered SVOD plans during lockdowns and now want to convert those audiences to ad-supported plans.

The one exception is Amazon Prime, which many consider a freebie because many consumers use it to get free delivery on the products they buy. 

Is SVOD a Relic of the Past? 

Streaming providers will counter that their ad-supported subscriptions are up, a fact that no one can argue with. What’s more, actual viewing time is also up. According to MNTN Research, CTV viewers spent 48% of their time with ad-supported content in 2022, marking a 55% increase over the previous year (I couldn’t find numbers for 2023). Still, that leaves half the viewers watching ad-free, and an untold number wish they had more SOVD options.

While consumers want SOVD, it may become a relic of the past. Streaming services are carrying a lot of debt due to investing in original content and licensing fees to expand their content libraries to keep subscribers watching. According to the Hollywood Reporter, “Executives at every streaming giant with both an ad-supported and an ad-free tier (including Disney, Netflix, Paramount, Warner Bros. Discovery and NBCUniversal) say that total revenue per user is higher on the ad-supported plan than it is on the ad-free plan.” So, while consumers think they shouldn’t have to see ads if they pay, the economics say otherwise.

Streaming companies must explain to consumers that rising production and licensing costs require advertising. They can look to the online public industry for inspiration. For instance, many have sliced and diced their content to create new products that attract new audiences. They also need to do a better job explaining the role of advertising and find ways to make ads an integral part of a positive viewing experience.