An already growing trend, the over-the-top (OTT) video market has been bolstered by the change in consumer habits brought about by the COVID-19 pandemic. This has led to both opportunities and challenges for the Entertainment & Media industry.
Media & entertainment insurance

As social distancing, self-isolation and lockdowns saw consumers spend more time at home, an unexpected positive emerged for companies delivering engaging in-home content, such as over-the-top (OTT) video services.

In 2020 the UK’s OTT video market grew considerably, with predictions from PwC of 18.6% growth to £1.7bn. Similarly, subscription video-on-demand (SVOD), the fastest growing sub-sector of OTT in the UK, was expected to leap by 21.9% to GBP1.2bn1. The trend has also been reflected in the US, with 64% of USA-based internet users having at least one OTT video subscription2.

The need for in-home entertainment remains higher than ever. With revenues surging and a strong growth outlook, OTT has started to ripple away from the streaming powerhouses of Netflix and Amazon and catch the attention of the wider industry.

The UK is a prime example where television channels and global tech firms have started to make their own plays in OTT video recently. These included the launch in November 2019 of BritBox, 90% controlled by ITV alongside the BBC. Apple TV+ launched in the UK in the same month as part of a global rollout. Whilst Disney+ launched in early 2020, attracting 4.3m UK subscribers by June 20203.

Short-term issues for OTT content providers

Despite the rising trend and strong growth figures, there are immediate challenges that have come about from the pandemic that OTT video providers must consider:

  • Decrease in consumer income - In a recent media trend survey, 39% of respondents reported a decrease in household income since the pandemic began4, with those that have lost income more than twice as likely to cancel a streaming service because of cost5.
  • Increased churn rate - In a more cost-conscious consumer market, retention has now become more important than acquisition. This is further compounded by the fact that the churn rate among US based OTT services went from 35% in Q1 2019 to 41% in Q1 20206.
  • Demand for original content - Original content is king in this space, with 44% saying they subscribed to a new streaming service to watch new, original content not available anywhere else7.

For Entertainment & Media companies in the OTT video space, these challenges have however brought strategic clarity: Consumers want bespoke options in terms of content and pricing. Those that have a broad selection of original content and tiered pricing (including free, ad-supported offerings) will be best placed to retain their customer base in an industry where audiences are more empowered than ever.

Four key customer retention opportunities for Entertainment & Media companies

  1. Pursue original content and tailored advertising
    With more and more content to choose from, consumer behaviour and taste has become more sophisticated. Those that can continue to provide original, unique content coupled with advanced recommendation engines are going to capture a bigger slice of the pie.
  2. Offer tiers for your consumer pricing
    With concerns about the cost of streaming, providers should look to offer a range of price brackets – from zero cost ad-supported streaming, right through to premium ad-free subscriptions. The numbers speak for themselves: 47% of US consumers admitted they use a no cost ad-supported streaming service and 65% of US consumers wanted access to cheaper ad-supported streaming options8.
  3. Diversify your digital content offerings
    The pandemic has accelerated a shift in lifestyle, with many of our altered ways of living and working here to stay – from home working to home workouts, live tuitions to virtual events and socialising. Entertainment & Media businesses that can continue to track these consumer habits and create fresh forms of relevant content will maximise their retention. The new normal is a new opportunity.
  4. Be dependable and trustworthy
    The pandemic has given Entertainment & Media brands the opportunity to step up and deliver solutions and promises to their customers and to society. Examples include paywall removals from news outlets, reduction in pricing by streaming providers and manufacturers turning their expertise to assisting with ventilator production. For those who have provided a positive societal action during the pandemic, the more likely they are to retain customers that share the same values.

4. Digital media trends survey, 14th edition | Deloitte Insights
5. Digital media trends survey, 14th edition | Deloitte Insights
6. SVOD Faces its Post-COVID-19 Future - WORLD SCREEN
7. Digital media trends survey, 14th edition | Deloitte Insights
8. Digital media trends survey, 14th edition | Deloitte Insights

This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note we have relied on information sourced from third parties and we make no claims as to the completeness or accuracy of the information contained herein. It reflects our understanding as 22.04.2021, but you will recognise that matters concerning COVID-19 are fast changing across the world. You should not act upon information in this bulletin nor determine not to act, without first seeking specific legal and/or specialist advice. Our advice to our clients is as an insurance broker and is provided subject to specific terms and conditions, the terms of which take precedence over any representations in this document. No third party to whom this is passed can rely on it. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to fullest extent permitted by law. Should you require advice about your specific insurance arrangements or specific claim circumstances, please get in touch with your usual contact at Gallagher.