A recession could leave streaming subscriptions vulnerableTuesday, October 29th, 2019
Recession to hit Millennials hard, leaving streaming subscriptions vulnerable, MIDiA report says
- MIDiA report reflects on how digital media companies will be impacted and can prepare for a looming economic recession
LONDON — Millennials are poised to have their pockets hardest hit should the economy take a downturn, with the impact on their spending power directly upending loyalties to app subscriptions across entertainment.
In its first Recession Impact (How an Economic Downturn Could Reshape Digital Media) report, MIDiA Research explores how an economic slump could reshape the digital economy, following its prodigious growth in an era of easy access to capital and low interest rates.
In such a period, Millennial entertainment mainstays such as Netflix and Spotify could be some of the first casualties of a recession, facing the double whammy of constricted disposable incomes and free high-quality alternatives.
With consumers migrating towards free platforms, AVOD services like Viacom’s Pluto TV and Sony’s Crackle could be big video winners in video streaming. Digital advertising could also see an accelerated boom as advertisers seeking better ROI shift spend to digital channels.
In the meantime news subscriptions, having already tapped into their most loyal bases, should see these affordable and convenient propositions maintain their course.
It’s not all bad news for subscriptions, however, and companies like Amazon – which has been quietly building a digital content powerhouse that provides its consumer base with a broad range of content and services that are free at point of access, are primed to come out largely unscathed.
Likewise for Apple, with its diverse portfolio of subscriptions that can be combined into a single, free-at-point-of-access proposition bundled into its devices, should it opt to do so.
In gaming, the lower disposable income dynamics will boost the attractiveness of the recently launched games streaming and subscription services like Google Stadia, Apple Arcade or Amazon’s games streaming service (when it launches).
Industry-wide unease will likely see global banks and other financial institutions start to de-risk their balance sheets in the face of an impending recession. This could result in less capital available to investors and lenders calling in debts.
Key takeaways from the report:
- Advertisers seeking better ROI may trigger an accelerated shift to digital advertising
- Amazon’s multi-format retail/entertainment bundle will help it thrive in a recession
- Pricey gigs and festivals will be an expensive luxury many consumers will decide they simply cannot afford
- Sports-centric streaming services without premium domestic rights are positioned as additive services, placing them at the forefront of subscription cancellation risk during a recession
- Traditional pay-TV providers could see subscribers opting out of their expensive sports package, although early-termination fees would deter cancellations
- Growth-stage digital media companies could find themselves struggling to raise investment and forced to scale down, sell or go under.
This report is available to download for MIDiA clients or for purchase.
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