Spending

How will the UK’s cost of living crisis impact consumer video spending? – European digital television

It’s been hard to avoid stories about the UK’s cost of living crisis lately, but news this week that the inflation rate had risen to 9%, its highest level in 40 years, have made it inevitable.

The impact of this has been felt across all sectors, and although the media and entertainment sector is relatively superfluous when families in difficulty seek refuge in fast food restaurants this is still something that requires discussion.

It’s a simple fact that when times get tough financially, the easiest things for households to cut back on are entertainment. Cinema outings, for example, had already been dampened by the covid-19 pandemic, but low-income families are likely to be even more selective about if and when they take a trip to see the latest blockbusters. (That didn’t stop Marvel Studios’ latest movie Doctor Strange in the Multiverse of Madness to earn over £30m at the UK box office, mind you).

But closer to home, the relative ease of exchanging subscription video services will force them to prove their worth to consumers.

Like Omdia analysts Irina Kornilova and Marija Masalskis apply“As utility bills and food prices rise, will Netflix and other M&E companies need to warn shareholders about competing for a resource that is expected to become scarcer than consumer attention: the household budget?

SVODs ready to prove their worth

One likely outcome of the current financial situation is an acceleration in the move away from purely subscription-based streaming models.

Like I previously discussed earlier this month, you’ll be hard pressed to find a major SVOD in the coming years that doesn’t offer an ad-supported model. Netflix, once a company that said it would never consider adding ads, may offer its ad-supported product before the end of the year while Disney has provided an outline of how its ad business will be structured for Disney+.

These are global and largely US-oriented changes seen in the industry, but carriers could seek to accelerate these plans for the UK, which Omdia says is “probably one of the economies hardest hit by the rising cost of living”.

But while columnists around the world wrote about Netflix subscriber losseseven with rising prices, they still present remarkable value for money compared to the consumption of physical media of previous decades.

Omdia analysts believe SVODs should do well and “consolidate their popularity, thanks to the all-you-can-eat value they offer”, but warn that “many consumers may be looking to reduce their overall spending by switching to lower-tier products, bundles or discounted family plans, by exchanging services to access specific content, or by canceling contracts when they have multiple subscriptions, such as online video.

“Households subscribing to multiple services are likely to think more about which ones are essential and which ones they can afford to swap or cancel altogether.”

Ultimately, the research firm believes the cost of living crisis is “likely to be neutral” for SVOD, with any losses offset by changes elsewhere in the market.

Changes elsewhere in the market

While SVOD should come out of all of this well, the same cannot be said for transactional video-on-demand (TVOD) offerings and pay-TV operators.

“Pay-TV components may bear the brunt of consumer attempts to reduce overall spending, as larger bouquets of channels and content are seen as less essential than connectivity,” Omdia analysts note.

Not that they would have done so in anticipation of a possible recession, but pay-TV operators like Sky and Virgin Media O2 will be grateful for their investments in aggregation with platforms like sky glass and Flow.

Source: Omdia

But in addition to only offering pay-TV services that take streaming into account, Omdia notes that “the damage to pay-TV will be mitigated by the power of subscriptions and, in particular, bundles that include broadband services. utility-type household mobiles with long contract terms”.

When it comes to transactional purchases of series and movies on platforms like Amazon, Apple and Rakuten, Omdia predicts that the cost of living crisis will have a “very negative” impact.

It’s again a logical deduction – when you count the pennies, spending between £5 and £15 to buy or rent a single film doesn’t seem like good value for money, which underlines just how much your SVOD money is profitable.

The only clear no-frills winner for consumers will be free ad-based platforms like Pluto TV and Amazon’s Freevee (formerly IMDbTV).

“The impact on ad-supported online video is likely to be very positive,” says Omdia. “Services have performed well during the COVID-19 pandemic, and we expect that to continue during this recession. There’s huge potential for TV ad dollars to move online as consumers’ appetite for watching ad-supported video grows and major media companies position their premium services as TV 2.0.

Omdia notes that “digital advertising will continue to thrive” as brands increasingly move away from traditional television advertising towards the web.

Analysts add, “These same big brands will turn to digital as a more cost-effective way to reach consumers and drive sales than traditional advertising. For the long tail of small and medium advertisers, digital advertising will become increasingly essential to their very existence. »

While it’s easy to argue that entertainment is a frivolity when people are facing genuine hardship, like during the pandemic, Brits will see video as an escape and a way to ‘bond socially’ like Omdia says. One of the best things about the TV industry in 2022 is that there are options available for every budget, and consumers will be looking to make the most of those options even as their purse strings tighten.