Netflix – Saved by SAVOD?

Last week marked Netflix’s official launch of their ad-supported tier. The platform joins other Subscription & Advertising Based VOD (SAVOD) platforms such as Discovery+ and NOW in the UK who offer tiered propositions, which includes a cheaper ad-inclusive tier. Disney+ also announced they will be replacing their basic package with an ad-supported tier, meaning existing customers will be required to pay more to access ad-free content.

Both platforms hope to increase subscriptions by enticing new audiences, whilst retaining subscribers who are concerned about spending during the ongoing cost of living crisis. Netflix’s current Basic package costs £6.99 per month, but their new Basic With Ads package will be discounted at £4.99. Disney+ are yet to confirm their tiered pricing options, however have confirmed they will be increasing prices for existing customers in order to avoid ads instead of offering cheaper ad-supported tiers that offer an alternative. The benefits of SAVOD for both these platforms will rely on the balance between revenue growth from advertising against a potential slowed growth in subscribers.

With all of this in mind, we’ve been exploring how we feel UK viewers will respond to these SAVOD launches.

The UK is primed for SAVOD

The UK is already a well-established advertising market for video on demand providers, with higher levels of AVOD viewing compared to the rest of Europe and the US. Audiences in the UK are familiar with the SAVOD proposition, driven by interactions with commercial broadcasters’ streaming platforms including ITV, Channel 4, Channel 5 and UKTV.​

MTM’s projections expect that long-form AVOD viewing will grow by 7% yearly before even accounting for the impact of Netflix and Disney+ entering the SAVOD market.  Our forecast also suggests Netflix and Disney+ will take a large share of total AVOD streams over the next five years. With AVOD itself driving the biggest increase in overall ad spend online – growing by more than £1 billion in the past year, the SAVOD market potential should not go unnoticed.

The Appeal of Netflix’s SAVOD Offer

Within a recent MTM study, we asked how willing people would be to either switch or take-up Netflix’s ad-supported package. Evidently, there is a lot of interest in this offer with 49% of current subscribers claiming they would consider moving down to their cheaper SAVOD plan, and 28% of Netflix non-subscribers claiming they would consider taking up this package.

The most appealing feature of SAVOD propositions are often the lower price tier. Existing SAVOD subscribers of other services already recognise these benefits, with 41% of NOW UK subscribers claiming they think the SAVOD tier offers ‘great value for money’ compared to 35% of those on the ad-free tier which is an extra £5 a month.

However, careful consideration of how each platform positions their new SAVOD proposition, during their launch, will be important in driving value perceptions. Consumers perceptions around value for money will be impacted by more than just the reduced price point. Careful planning around aspects such as communicating a clear market proposition, content promotion plan and establishing an easy user experience will also play a key role in driving value for money perceptions, to aid customer acquisition and retention.

Encouraging acquisition and retention:

1. Supporting an easy experience

Reducing steps to access any new SAVOD service will be hugely influential. How easy will it be to switch between tiers? A less strict lock-in process could allow for subscribers to trial different models and find the right fit, especially immediately after launch.

2. Having a clear content proposition

Customers need to be clear about the content on offer and price point of the SAVOD tier. Clear communication via marketing is vital for acquisition prospects, and delivering upon these promises will help maintain trust and encourage retention among subscribers.

3. Remaining fresh and fun

Finally, building excitement towards any product launch is key! People buy emotively, so both exciting and delighting customers through continuous innovation and personalisation, especially of ad content, will be important.\