2014/03/28 Consumer Demand Drives Online Video Subscription Service Content

Imagine being a Netflix brand manager.  Netflix started out by building its brand as a video disc rental service and then reinvented itself to become the industry’s premiere online video streaming service. Along the way, the Netflix brand became synonymous with archived movies and vintage TV programs. Its astounding success was based on giving subscribers inexpensive, all-you-can-eat access to a huge library of archived video entertainment, not available from other sources.  The movie studios loved it as much as consumers did, for Netflix created a distribution channel for older, non-revenue producing titles.  Then, Netflix decided to disrupt everything again, this time shifting its focus to exclusive and original content.  Rather than being a decision of divine inspiration, Netflix was simply aligning its video content to match consumer demand.

In our recent Video Entertainment Survey, we asked Internet users to rank the types of video content they are (or would be) interested in viewing as part of an online video service.  Figure 1 depicts the types of video content that are most important to current and those indicating interest in the Netflix video streaming service.

Figure 1.     Most Important Video Content for Viewing (% of Internet Users)

The survey data confirms that recent theater movies and original TV series are the types of video content that consumers are seeking in an online video service.  Of those that are not currently a Netflix subscriber, but expressed interest in the service, interest in recent movies and original TV programming is similar to current Netflix subscribers.  This suggests that Netflix has the potential for continued subscriber growth in the US.  Overall interest in original TV programming is highest among those expressing no interest in Netflix.  These may be pay-TV-centric viewers, who over time may warm to the idea of a Netflix subscription, especially if Netflix becomes part of the pay-TV service bundle in the future.

Previous season episodes of current TV series have a much stronger appeal to current Netflix subscribers than non-subscribers.  The least valued video content among Netflix subscribers is archived movies and TV services no longer in production.  Is it any wonder that Netflix embarked on another rebranding initiative?

Table 1 compares the most important video content by multiple online video subscription services, including Netflix, HuluPlus and Amazon Prime Instant Video.  The data is remarkably similar across all three services.   It appears that Amazon Prime may now be attracting viewers of archived movies (possibly migrating over from Netflix).

Table 1.        Comparison of Content Interest Among Users of Online Video Subscription Services

Source: SNL Kagan MRG Video Entertainment Survey, Feb. 2014

Exclusive TV/movie licensing agreements and original TV programming, combined with previous seasons of current TV series allows Netflix to address 81% of its subscriber’s most important video content. For HuluPlus and Amazon Prime, a similar strategy addresses 78% and 80% of their subscriber bases, respectively.  More importantly, consumers expressing interest toward HuluPlus and Amazon Prime services have similar content interests to those with an interest in Netflix.  With regard to online video subscription services, US consumers appear to have very common video entertainment interests.

This research is part of the US Multiscreen research service.  It delivers an in-depth assessment of how consumer behavior, preferences and attitudes are impacting the US video entertainment market.  The research focuses on how connected devices, services and content are evolving to form the next-generation multiscreen video entertainment experience.  To learn more about this research please contact SNL Kagan MRG, or your SNL account manager.

Source: MRG Analysis