Digital media: thesubscription prescriptionDeloitte Global predicts that by the end of2018, 50 percent of adults in developedcountries will have at least two online-onlymedia subscriptions, and by the end of 2020,that average will have doubled to four. The costof these subscriptions – spanning principallyTV, movies, music, news and magazines – willtypically be under 10 per month each in 2018.In total, we estimate there will be 580 millionsubscriptions and about 350 million subscribersthis year (see Figure 15).We further predict that a fifth of adults indeveloped countries will pay for or haveaccess to at least five paid-for online mediasubscriptions, and by the end of 2020, they willhave 10. For these adults, aggregate spend ondigital subscriptions they have access to (paidfor by themselves or by someone else in thehousehold) is likely to average over 100 permonth by 2020, or over 1,200 annually.These subscriptions will be in addition totraditional media subscriptions that includeonline access, such as a pay TV or newspapersubscription that often includes one or moredigital passes.Figure 15. Global digital media subscriptions (million)400350172. We estimate that about a fifthof US homes in the 1970s wouldhave had 10 or more mediasubscriptions. Appetite formonthly media remains strong;these media subs have comeback, but via a changed deliverymechanism, and we may even bepaying about the same; 1,200 in2017 is the equivalent of 284 in1977, or under 24 per month.173. It seems likely that at least a fifthof US homes in the 1970s wouldhave had 10 or more mediasubscriptions. For that to turninto 10 or more digital mediasubscriptions shows that whilethe delivery mechanism may bechanging, human appetite formonthly media remains strong.174. In 1977, the average newspapercost about 5 per monthdelivered, cable TV was 7.50 andweekly magazines were 2 to 3per month. A two-paper, fourmagazine home with cable (notusual) would be spending wellover 25 per month.300250200150175. Select the premium subscriptionthat suits you, Telegraph, asaccessed on 3 November 500171. In the US, subscription stackingfor multiple SVOD serviceshas been a notable feature forseveral years, but as of 2018, weare seeing acceleration in thetrend spanning multiple media.SVODMusicSource: Deloitte Global analysis, 2017Online gamesNews176. Spotify and Hulu unveil first ofits kind premium entertainmentstreaming bundle, Spotify, 7September 2017: -hulu-streamingbundle/.177. Number of global mobilesubscribers to surpass five billionthis year, finds new GSMA study,GSMA, 27 February 2017: n-this-year/.
Digital media: the subscription prescriptionWhile the accumulation of online, digital-onlysubscriptions across multiple media is relativelynew,171 multiple media subscriptions are not.172Online media subscriptions are the digital updateand upgrade to behaviors exhibited a generationback, when households would subscribe tomultiple media, including newspapers (morningand evening), magazines and books (adults andkids, from fiction to reference), analog cable TV,music, and more recently, DVDs,.173, 174Why did people stop subscribing? A major triggerwas the online revolution in the mid-1990s andthe accompanying belief that online ad-fundedcontent, shown to hundreds of millions andultimately billions of eyeballs, would be morelucrative than digital subscriptions. As so muchcontent – particularly news – became free,media companies and their investors startedto measure success by metrics such as globalmonthly web browsers (the number of individualweb browsers that hit a site), expecting thatrevenues would follow the eyeballs.As of 2018, it is possible for a media site to reachhundreds of millions of different web browsersper month, a phenomenal total for a newspublisher whose reach would formerly have beenrestricted to its local market.But as reach has grown, revenue per viewer, visit,impression, web browser or click has steadilyfallen. For some publishers, generating sufficientrevenue from online advertising alone has feltlike a Sisyphean task.As traffic volumes have increased, revenueper impression has fallen and the number ofintermediaries extracting a commission has risen.To compensate for this, web pages have becomeever more cluttered with banner and video ads.In response to the proliferation of advertising,hundreds of millions of online consumers havedeployed ad blockers, which in turn has provokedthe channeling of ever more advertisements perpage to those not blocking ads.In response, content creators have increasinglystarted to focus on growing their online digitalsubscription revenue and on formulating evermore varied and appealing digital subscriptionpackages. As this has happened, consumershave become increasingly willing to pay for digitalcontent – even when the same content might beavailable for free via another source, legal or not.Looking across all forms of online media, we findthe principal drivers of the rise in online mediasubscriptions are likely to include: Supply side: Steady growth in the number ofcompanies offering online media subscriptions,and fragmentation of content libraries. Forexample, rights to watch a specific sports teammay be split across two or more providers,requiring more than one subscription, ordrama fans may need to purchase two ormore subscriptions to be able to access all theprograms they want to watch. There has alsobeen growth in subscription bundling. AmazonPrime is the best known, and it bundlesa range of add-ons to delivery, includingvideo. The Telegraph (a newspaper in the UK)has offered Amazon Prime for free with itsonline subscription,175 and in the US market,students were offered Spotify Premium with asubscription to Hulu.176 Demand side: Increased willingness amongconsumers to pay for content online ratherthan consume ad-funded content. This ispartly driven – especially for news – by risingawareness of the variations in caliber of newsoutputs. Furthermore, the attractivenessof the online model is, for some genres,becoming more compelling than pre-existingtraditional alternatives. Music subscriptionsoffer access to tens of millions of tracks andhundreds of thousands of playlists, some ofwhich are customized to the subscriber, andall are available on demand. For many, this issuperior to owning a digital or physical musiclibrary. In some markets, consumers are “cordcutting” and “cord shaving” their traditional payTV bundles – that is, cancelling their pay TVsubscriptions outright or else downscaling theirpackage to reduce cost. In some cases, theseconsumers are replacing all or some of their TVcontent with SVOD.02178. For example, Spotify can bequickly accessed from a widerange of connected speakersand other devices, ranging fromsmart watches to connectedlights. For more information, seeSpotify Gear, as accessed on3 November 2017: https://www.spotifygear.com/.179. This process uses name, addressand credit card information thatis already stored on the phone;entering all this information in aform could take a few hundredkeystrokes, putting off mostpotential subscribers.180. For more information, see Printscharming: biometric securityreaches the billions, Technology,Media and TelecommunicationsPredictions 2017, DeloitteTouche Tohmatsu Limited, 11January 2017: www.deloitte.com/tmtpredictions.181. Doubling up on pay-TV,Deloitte TMT Predictions,Deloitte Global, January ons/dttl TMTPredictions-2014-lc2.pdf.182. How Disney wants to take onNetflix with its own streamingservices, The New York Times,8 August 2017: disneystreaming-service.html.183. Sky to launch “Simple andAffordable” OTT service in Spain,Variety, 26 July 2017: pain-1202508252/.184. Formula 1 plans to launch inhouse streaming service in 2018,Autosport, 21 October lans-to-launchlive-streaming-service.185. Netflix looks beyond US originals,Broadcast, 28 September 86. HBO Nordic moves into originalswith comedy drama “Gosta,”Variety, 19 September rst-originalsgosta-1202563486/.187. HBO Espana orders originalseries on Basque conflict ‘Patria,’Variety, 21 September alea-mediadevelop-patria-1202565131/.
Digital media: the subscription prescriptionThere are also several technological enablers thatare making online-only subscriptions more viableand easy to use. The steady rise in broadband speeds hasfacilitated the rise of the online subscriber.A decade ago, relatively few households indeveloped countries had broadband speedsthat could reliably deliver online video to TVsets. As of early 2018, however, hundredsof millions of homes will have this capability,and streaming services are now available in4K or ultrahigh-definition (UHD) resolution.The growth of 4G networks has made musicstreaming while connected to a mobile network(say, in a car or on a bus) far more reliable.At the end of 2016, about 60 percent of theworld’s population was in a market with accessto 4G. By 2020, about 40 percent of all mobileconnections will be 4G.177 There is a growing base of devices that facilitateaccess to online media subscription services.As of 2018, hundreds of millions of TV sets andset top boxes will have the capability to accessSVOD services directly. This contrasts with theearly days of SVOD, when consumers wouldwatch on a laptop, which typically meant aninferior video and audio experience relativeto that from a TV set. A similar change hashappened with music. Premium connectedspeakers are shipped with fast access to built-inpremium subscription services.178 A further enabler has been the ease of sign-up.Users can now subscribe to online media withjust a couple of clicks from a mobile browserpage, followed by a tap of a fingerprint readerto authenticate payment.179 Deloitte Globalestimates that by the start of 2018, a billionsmartphones and tablets will have fingerprintreaders, and in some markets, over 80 percentof these are used.180 Smartphone screens have steadily expandedover the past decade, with the majority ofmodels on sale in 2018 offering a screen thatis 5 inches or larger, often combined with pinsharp resolution. News articles displayed on asmartphone are now very similar in dimensionto a newspaper column, with about eight to 10words per line.Demand dynamics for each medium are likely tovary considerably in 2018 and in years to come. Inthe next section, we look at trends in television,music, video games and news.Online TV and movie servicesAt the start of 2018, we expect there will beabout 375 million SVOD subscriptions worldwide.A growing number of individuals will have accessto multiple subscriptions – a trend DeloitteGlobal wrote about in 2014 and called “cordstacking.”181 According to one study, the majorityof subscribers to Hulu and HBO Now alsosubscribe to Netflix.The number of SVOD services a householdmay have access to is likely to increase throughthe end of the decade as more productionhouses and content owners launch over-the-top(OTT – content delivered over the internet)services.For example, Disney is launching two SVODservices in 2018-19, one focused on sports underthe ESPN brand and the other on Disney andPixar movies and Disney TV programs.182 In 2017,Sky launched an OTT service in Spain, followingHBO’s launch of an OTT service the prior year.183The owners of Formula 1 have announced plansto launch an OTT service in markets where theycurrently do not have distribution.184By the end of 2020, we expect that in matureSVOD markets such as the US, an individual maysubscribe or have access to multiple TV servicesspanning many genres, including drama, comedy,sports and kids. In the US market, a sports fanmay want to subscribe to OTT services for eachof the major sports (football, hockey, baseballand basketball).In the UK market, it is already the case that to beable to follow their team, football (soccer) fansneed to subscribe to two services, as games aresplit between two providers. A person who isalso, say, a tennis fan might wish to take up anadditional OTT subscription, particularly if there isonly scant free-to-air TV coverage. Traditional payTV providers, which have long broadcast in digital,are likely to offer OTT services increasingly as acomplement or an alternative to existing services.In non-English-speaking markets, we expectmore local language content to be created todrive demand for OTT services. Netflix hascommissioned local language productions inmultiple countries, including Mexico, India, Braziland Germany.185 HBO is commissioning locallanguage content, such as the Swedish languagecomedy Gosta186 and the Spanish languagedrama Patria.187 As more local language contentis developed, SVOD services will broaden theirappeal; fluency in English or a willingness toconsume dubbed or subtitled content will nolonger be necessary.03188. TV series budgets hit thebreaking point as costs skyrocketin peak TV era, Variety, 26September 2017: osts-rising-peaktv-1202570158/.189. Young subscribers flock to oldmedia, Politico, 21 October2017: lstrump-paying-for-news-244001.190. Scandinavia emerges as goldstandard in digital subscriptions,International News MediaAssociation, 22 October tions.191. How the Guardian found800,000 paying readers,The Drum, 26 October -theguardian-found-800000-payingreaders.192. One publisher, Amedia, foundthat including live streams oflower-league Norwegian footballmatches was crucial to triggeringsubscription sales, even if thematch was being covered byjust one camera. Scandinaviaemerges as gold standard indigital subscriptions, INMA, 22October 2017: s.193. NYTimes revenues boostedby digital subscriptions, onlineads, Financial Times, 31 October2017: 890c3e15ac93.194. Ibid.195. Washington Post digitalsubscriptions soar past1 million mark, CNN, 26September 2017: ost-digitalsubscriptions/index.html.196. How The Washington Post grewdigital subscriptions 145 percent,Digiday, 12 July 2016: tal-subscriptions145-percent/.197. FT reports 650,000 digitalsubscribers with boosts aroundlast year’s Brexit vote and USelection, Press Gazette, 3 April2017: it-vote-and-uselection/.
Digital media: the subscription prescriptionAs the cost of programming rises, with severalseries now costing over 10 million per episode(and possibly heading to 20 million per hour),188and with the cost of sports broadcast rightscontinuing to increase, the number of distinctproviders may end up increasing as providersreduce the size of their program portfolios andfocus on fewer “tentpole” productions.Online newsBy the end of 2018, we expect there will beabout 20 million digital-only news subscriptionsworldwide. This is a seemingly modest totalrelative to SVOD television and movie services.However, online news services tend to be amongthe most expensive individual services, oftencosting tens of dollars per month, and there arealso many tens of millions more subscribers toprinted newspapers and magazines.We expect news providers to focus increasinglyon generating revenue from subscriptions,typically as a complement to advertising, giventhe challenges they have encountered duringyears of reliance on ad revenue alone. Whereascertain titles had a 10:90 ratio of subscription toad revenue in 2012, we predict it may be 50:50by 2020.This increased focus on subscriptions has alsocoincided with a growing awareness among somereaders of the variability of the quality of news.In 2017, the market with the biggest surveyedwillingness to pay for news was the US. Thedesire was strongest among 18-to-34-year-oldmillennials. According to one study, the numberof people willing to pay for online news jumpedto 16 percent in 2017 from 9 percent in 2009.Multiple US-based news publications, includingthe New York Times and the Washington Post, havereported a surge in subscriptions from 18-to-34year-olds.189Publishers have also become more adept atidentifying trigger points that can cause readersto become subscribers and at recognizing whattype and proportion of content to place behindthe paywall. For example, on big news days,paywalls may be lowered to encourage peopleto access content. Some of those who view thecontent then become subscribers once thepaywall is reinstalled.190 Periods in which thereis major breaking news have been found to beoptimal occasions for publications to requestcontributions.191 In some cases, the offer of livevideo has helped trigger subscriptions.192As mentioned earlier, the past two yearshave seen a marked increase in the numberof publications earning regular income fromsubscribers – digital as well as physical.In the US, the New York Times had nearly 2.5million digital-only subscribers as of the thirdquarter of 2017.193 Digital subscription revenue,including revenue from those subscribing tothe crossword and to its cooking app, rose by46 percent, to 85.7 million.194 The WashingtonPost surpassed one million digital subscribersin 2017;195 as of mid-2016, the newspaper hadgrown its digital subscriber base by 145 percentyear-on-year.196The Financial Times, which has always hada paywall, ended 2016 with 650,000 digitalsubscribers, a 14 percent increase over theprevious year.197 As of the end of June 2016,the Times and the Sunday Times had 413,600subscribers, of which 182,500 were onlydigital.198 The Guardian offers subscriptions aswell as memberships. In July 2016, there were50,000 members, each paying between 5( 6.5), equivalent to 111 unique web browsers,and 30 ( 39.3), equivalent to 666 unique webbrowsers per month.199 As of March 2017, therewere 200,000 members200 and a further 185,000subscribers.201 In November 2016, the Telegraphreplaced a metered paywall with a range ofsubscriptions, with digital-only service starting at 2 ( 2.60) per week.202Publications are diversifying into a range ofsubscription services on top of online andphysical copies. For example, Business Insideroffers subscriptions to its BI Intelligence service,which is priced at 2,500 per year and has anestimated 7,500 subscribers. Enterprise-levelaccess costs up to 150,000. One reason BusinessInsider diversified was its recognition that it couldnot keep growing solely via unique users, whichnumbered 54 million in March 2017.203CNN will also start offering tiered subscriptionpackages for its digital news business in the firsthalf of 2018. The premium offering will be fortopic-specific news, such as CNN Money andCNN Politics.20404198. The Times and The Sunday Timesachieve record subscriptions,News UK, 21 July 2016: orm-market-in-abcfigures-released-today/.199. Guardian’s losses hit 69m but itgains more than 50,000 payingmembers, The Guardian, 27 July2016: dian-losses-members.200. The Guardian’s membershipsch
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