Justin Krieger is a director within RSM Canada's growing technology, media and telecommunications group and supports the progress of the practice through client development, industry knowledge and relationship management.
What do you see happening in the streaming space now?
There is significant saturation in the media industry, making it really hard for companies to grow user counts, especially in the streaming sector.
Consumers face more choices for platforms than ever; large media companies are battling an expensive content war, with high competition and the continuous need for new, high-quality entertainment. So, large companies will continue to increase content diversity to deal with that.
An example of that is through streaming companies purchasing sports media rights. Another example is through interactive entertainment, such as video gaming.
How is this playing out in sports?
Watching live sports is one of the key reasons consumers have stuck with traditional cable packages. Consumers really enjoy watching live sports on television. So, since large streaming companies have large media aspirations and the continued need to battle customer churn and increase content diversity, they have started buying sports rights from the major professional leagues.
It's happening with soccer and football, to name two. Many rights deals have expired in the past couple of years and we are seeing a shift to the streaming space that was hard to imagine even five years ago.
What about gaming?
This is an area where the change will be profound. Netflix is entering the cloud gaming market with initial testing taking place in Canada and the U.K. Netflix has been involved in the gaming space for a while. But with the move to cloud gaming, they are able to build on their initial expertise of streaming TV shows and movies.
Why is this important?
Gaming is already a large industry and will only grow in the coming years. Cloud gaming will play a part as users connect their gaming world to their existing streaming accounts. This change is happening for four reasons.
First, streaming services already have a significant user base. Second, streaming companies already have reputable name brands, so customers trust them. Third, the streaming services already have the technology. And last, they have a path to profitability in gaming in that in-game ads, for example, can be a good source of revenue.
Streaming services struggle to turn a profit. What's the path to profitability?
At one point, the focus for streaming companies was on user growth. More users could lead to profitability, the thinking went. But as it played out, that's not necessarily the case. The path to profitability is all about striking a balance between retaining users and increasing revenue.
Password sharing is one example. When a company places limits on password sharing, as has happened recently, the user count goes way up.
Another element is advertising. Streaming services are introducing several tiers of service. So you have one tier that costs less and includes ads and another tier with no ads but costs more. The multiple levels allow the streaming services to develop revenue streams from advertising unavailable to them before. And it gives consumers a choice—ads, no ads or cancelling. It's a winning equation for everyone.
