By: Mark Zagorski, CEO at Telaria
This past weekend, HBO showed everyone that they’re not quite ready to face a world without Game of Thrones because they were back with a two-hour behind-the-scenes Game of Thrones documentary a week after the show’s finale. That’s because every year after the season comes to a close, subscribers who pay the monthly fee to see if Jon Snow lives another day or who Daenerys sets her dragons on next, cancel their accounts. Last year, HBO saw a large percentage of the new subscribers that signed up at the start of the season vanish within six months of the last episode. With no more Thrones or major franchises for the foreseeable future, HBO has to lean on other strategies to prove it’s worth the monthly subscription fee.
The Battle for the Streaming Throne Is Getting Fierce
In addition to confronting Game of Thrones’ final season, AT&T – HBO’s parent company – is contending with stiff competition for consumer attention and subscription dollars as it is on the cusp of launching its own direct-to-consumer media platform. In addition to competition against digital-first networks like Hulu, Netflix and Amazon, there are new rivals on the horizon like Disney+ and Apple TV Plus. Consumers want a wide array of options when it comes to TV, but all of these disparate subscription services are simply not sustainable for their budgets. That’s when subscription fatigue kicks in. For HBO, its competitive advantage remains its incredibly high-quality programming; maintaining that element will be vital to keeping subscribers as they exponentially grow their library of programming.
Subscription Services and Ad-Supported Models Can Coexist
Non-ad-supported platforms rely on recurring subscription fees to monetize content investments, but as more streaming services enter the market, it will be more and more difficult for them to convince audiences to pay for each and every one. Inevitably, streaming services will have to adopt an ad-supported revenue model in addition to an ads-free subscription tier to capture wider audiences. Companies like Hulu have successfully implemented these hybrid revenue models to give more people access to its content library. Initially new services may debut as ad-free and subscription-only, but we will see them introduce a free, ad-supported tier to achieve scale like we saw with Amazon Prime’s streaming service. The costs to produce an HBO-quality show are fixed – why wouldn’t the company want more viewers to access the content and create a new revenue stream through advertising?
Winter Is Coming for Media Companies Who Don’t Innovate
If media companies like HBO don’t heed the warnings of subscription fatigue, we’re going to end up with an environment similar to the bloated, expensive cable TV packages for which streaming was supposed to solve. The complete refusal to support an ad-supported model is really the inability for certain streaming companies to reimagine and improve upon TV ad experiences. It’s a disservice to audiences who want to watch the latest shows but can’t afford 10 different services; ad-supported experiences allow more people across the socio-economic spectrum to participate in popular culture when it comes to entertainment and content. Just think about how many more Twitter memes we could have had if everyone could watch Game of Thrones!
Advertising on streaming platforms is taking on new and interesting forms—and the players that see this as an opportunity are poised to succeed. Hulu is experimenting with innovative, non-intrusive ad formats, and more streaming companies should be doing the same. It’s also important to note that a majority of Gen Z, the generation born in the late ‘90s, do not mind or even enjoy watching TV ads because they consider the ads content. The end of Game of Thrones signals the final death of appointment viewing. There is no denying the media landscape is quickly changing, and there will not be a happy ending for media companies that cling onto the successes of seasons past.