Why Social Platforms Need to Start Thinking about Subscription Video Offerings…Now.

Simply put, social platforms (where video is increasingly part of their user and business focus) need to seriously investigate the idea of a subscription video service sooner than later.

The struggle (for watch time) is real. There are still only 24 hours in a day, but there are numerous options to suck your free time away. It’s harder and harder to get (and keep) a user’s attention so more and more platforms are focusing on video as their savior.

There is no doubt that in the near term, increased watch time against video coupled with ads against that viewing, can help Facebook and others grow their revenues significantly as those units are much more valuable than display ads. The fact that many of us are already accustomed to advertising before and in between video (whether on TV or on YouTube) makes it even more of a no brainer (people love free). Even better, because these platforms largely know who is watching and increasingly, what they are watching, the ability to make the ad experience contextually relevant gets easier and easier. That idea of context will only become more and more important as ad dollars continue to shift from TV to social.

The only concern here is how much is too much in terms of ads? At a certain point the ad load around content becomes a deterrent. This is exacerbated by the fact that many of us have become accustomed to DVRs (which basically means no ads) and Netflix which clearly means no ads. According to a Variety article earlier this year, half of US homes now have a DVR and half have Netflix. And Netflix isn’t just an ad free video experience. It’s a seemingly unlimited, on demand content experience that is both intent based (YouTube) and feed based (Facebook). As much as we are used to ad supported video experiences, we are becoming more and more used to subscription video experiences too.

Google’s been most aggressive to date. YouTube Red and, as mentioned in my previous post, YouTube TV, represent Google’s attempts at “doing both” and so far, I think they’ve done a good job, particularly with the latter, as they know the game is chess, not checkers. The combining of live content from TV with on demand content from YouTube all in one experience is where they seem to be heading and that is smart in my opinion. Their price point (even though it won’t likely last forever) is very attractive to both current cable customers and those younger audiences that are “cord nevers.” Lastly, their World Series sponsorship was well timed, couldn’t be missed if you were watching and strategic on multiple levels.

Twitch has also been playing in this space, via their Twitch Subscriptions that offers additional content and ad free viewing for Twitch users on their favorite channels for a monthly fee. Anyone know how long an average Twitch user watches on the platform? Answer: A long fricken time. The idea of binge watching has been alive and well on Twitch since it launched. This is just the beginning for them as they also recently launched Twitch Prime which offers Twitch to Amazon Prime members (who of course are paying an annual fee for free shipping and access to Amazon Video).

They know both this: The race to capture their user’s loyalty and their money in this fashion has already begun and the sooner you can create a new behavior among your user base, the better. Cable and satellite subscriptions are vulnerable to competition now more than ever. That means $100 a month could be up for grabs.

Part of that $100 a month is already being gobbled up by Netflix, HBO, YouTube TV, Hulu, Amazon and the rest of the OTT players out there which adds even more urgency. Just yesterday, news broke that Disney is in talks to buy significant assets from 21st Century Fox. This is in addition to previous reports that Disney will soon stop putting much of its content on Netflix and build its own subscription service. Adding Fox film and TV assets to that offering could make it even more compelling. The point is that it’s already crowded.

But guess what, none of those offerings (including and especially cable) are inherently social. It’s clear by the amount of time we spend consuming content on Facebook, Instagram, Snap and Twitch that social matters to us and our daily lives. Those platforms also have direct lines to their users and data about their behaviors and interests. And for Snap in particular, the combination of their Discover content section and their strategic focus on users in the wealthiest and most developed countries make their audience particularly of interest from a subscription conversion perspective. My point: There’s still room for a social power player to gain market share and diversify their dependence on ad supported business models.

Here’s where it can get even better. It’s no secret that the ad supported approach to video often leaves content creators and owners feeling like they are getting the short end of the stick in terms of how much revenue they are generating per view. A subscription solution could offer content owners more direct compensation per view. That could lead to a willingness to put up more content on the platforms thus increasing supply of video and overall watch time. Everybody wins.

The dual revenue opportunity is something the cable networks and their channels have feasted off of for decades, but times are changing. Whose to say it can’t be YouTube, Facebook or Snap instead of Comcast and DirecTV that enjoys that dual revenue stream and whom we pay for video content? And that’s just in this country. Social platforms are positioned in a subscription model to become something US cable and satellite providers could only dream of: Global versions of themselves.

It wont happen overnight as the user experiences are still not on par with traditional cable offerings (but they are getting better), the business models are still being defined and the competition is real and fierce. But game changing things take time. While I am not suggesting anyone abandon their ad supported solutions, if you’re not thinking about how to diversify via subscription video today, you are already behind.

JK