How many streaming entertainment options are too many? It used to be there were only one or two subscription options out there. Now, the list is far longer.
Maryland Smith’s Bo “Bobby” Zhou, in a new study to be published in the Journal of Marketing Research, examined the increasingly crowded streaming stage to determine what industry leaders must do to hold the spotlight.
He finds that for streaming companies like Netflix, Hulu and Amazon Prime, the key is in securing a spot in consumers’ arsenal of entertainment options. Instead of being the sole option, Zhou says, companies must account for their customers buying subscriptions from competing services as well.
“Although the general perception is that the online streaming world is already getting very crowded amongst big players and online streaming service providers, it’s not necessarily the case,” says Zhou. “It’s not like a lot of consumers are not willing to subscribe to multiple online streaming services simultaneously.”
Zhou, alongside his two co-authors from Washington University in St. Louis and Fudan University in China, examined this consumer multi-purchase behavior and its effect on the streaming industry in terms of content acquisition and pricing strategies.
Zhou notes that this type of consumer behavior is not solely applicable to the streaming industry. Gamers often purchase both Microsoft’s Xbox and Sony’s Playstation. And computer users often buy both a Windows PC from Microsoft and a Mac from Apple.
However, Zhou notes that companies acquiring unique content amongst competition is essential for the industry’s overall success. Highly differentiated platforms, he says, motivate consumers to purchase subscriptions from various competitors, and as a result encourages content creators to increase production.
“I think the best strategy for Netflix and Hulu is to continue to invest heavily in original content, as well as further differentiate that content from whatever Disney is going to offer,” Zhou says. “For example, Netflix could bet big on sci-fi television shows, while Disney is going to promote family-oriented and kid-friendly television shows.”
Conversely, the research also reveals that reductions in content production and lower profits can be expected when content distributors are not highly differentiated. For example, if consumers find no discernable benefits of one service over another or the companies possess a limited amount of unique content then both demand and reach will decrease.
In this case, it may be in the best interest of streaming companies to discourage consumers from practicing their multi-purchase behavior, the researchers find.
It is content that is ultimately going to dictate demand and consumer behavior, Zhou says.
“I think movies and TV shows are a unique type of product and service in that they can always appeal to a niche market,” Zhou says. “I do think that Apple, Netflix and Disney will probably be very aggressive in trying to acquire some of those movie studios moving forward because content is king in this world.”
Read more: “Acquisition and Distribution under Consumer Multi-Purchase" is forthcoming in the Journal of Marketing Research.
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