Streaming Video Consumers: What's Most Valuable to Them?

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Authors : Ana Luisa from Camino Monclair, Bruno Saboya, Helena Araújo Costa

Summary

The video streaming entertainment service, more specifically, SVOD services – Subscription Video on Demand, is one in which the user pays a monthly or annual fee to access audiovisual entertainment content through an online platform. This service has experienced a great expansion due to the increase in the use of mobile devices (such as notebooks, tablets and smartphones) and mobile internet (3G and 4G) that have expanded the possibilities of connection for consumers. It was also driven by the impacts of the pandemic and social isolation which, by keeping people at home, led to an increase in the consumption of digital and traditional media. This teaching case, by analyzing the consumers of these services alongside Eduarda Garcia, a market intelligence and digital transformation consultant at UXT, proposes that the participant discuss aspects such as value attributes, utility and willingness to pay and, thus, reflect on strategies to better segment and price the services offered by a new company in this segment that is entering the Brazilian market.
Keywords : Video streaming. Value attributes. Willingness to pay.

Abstract

The streaming video entertainment service, more specifically, the SVOD services – Subscription Video on Demand, is one in which the user pays a monthly or annual fee to access audiovisual entertainment content through an online platform. This service has experienced a great expansion due to the increased use of mobile devices (such as notebooks, tablets and smartphones) and mobile internet (3G and 4G). Furthermore, it was driven by the impacts of the pandemic and social isolation which, by keeping people at home, led to an increase in the consumption of digital and traditional media. This study case analyzes the consumers of these services together with Eduarda Garcia, a market intelligence and digital transformation consultant at UXT. In the debate, the student will discuss aspects such as value attributes, utility and willingness to pay and, thus, reflect on strategies for better segment and price the services offered by a new company, which is starting operations in the Brazilian market.
Key-words : Video streaming; value attributes, willingness to pay.

Contextualization

Eduarda Garcia had a meeting with an important client for her company, UXT, a consultancy specializing in market intelligence and digital transformation. This client represents an English streaming platform that, having experienced great growth in recent years, has entered the Brazilian market, started the production of national content and now wants to better consolidate its performance in Brazil.

The project they are developing together aims to better understand Brazilian consumers of this type of service and, thus, outline strategies for the company's operations in this new market. To do this, it is necessary to identify the habits and preferences of these consumers, as well as the attributes they value the most and also how much they are willing to pay extra for each one.

Eduarda hopes to offer her contractor a solid foundation to define more assertive segmentation and pricing strategies, essential for operating in this relatively new and highly competitive segment, which requires constant innovation to stand out among the various competitors in the segment and also among the more traditional ways of consuming audiovisual content, such as television. One aspect that makes this even more relevant is that consumers of the streaming service expect high personalization.

At the project briefing meeting, in which the coordinator of operations in Brazil was able to present the company's main needs and results, a fact that caught the attention of the project team was the following statement from PWC's Global Entertainment and Media Survey 2019-2023 (2019):

"How do you consume entertainment and media content? Ask 20 different people, and you're likely to get 20 different answers, even if some of those people live under the same roof."

It was evident that the consumption of this service is very varied, but even so, the company needed to better understand the new market. The coordinator of new operations also stressed that the company does not want to make the same mistake that Netflix, its main competitor and leader in the segment, made when entering the Indian market1 - by refusing to make its service model more flexible, which offered access to all available content by paying a monthly subscription, it lost ground to local competition which, In turn, it worked with two alternatives: a free version with partial access to the content, financed by the exposure of viewers to advertising videos, and a paid version, without ads, with full access to the content.

This made it quite evident to Eduarda and her team that the streaming service has had global demand, but needs to adapt to the peculiarities of each market.

The growing video streaming market and its global trends: more entertainment streamed instantly via the internet

The UXT team had studied the streaming market before the briefing meeting. It was abundantly clear to them that digital technologies and the internet have promoted new forms of file sharing, contributing to a change in the way television and audiovisual entertainment content are consumed1. Based on a global scale, television content is already available and increasingly being accessed through various devices and platforms.

The 20th edition of PwC's Global Entertainment and Media Survey 2019-2023 (2019) points out that the OTT (Over The Top) segment is expected to double in size by 2023 compared to 2018, and this jump is mainly due to the growth in expected revenues for the SVOD category.

The improvement in the quality of online streaming has made this type of display often more attractive to the public than downloads1, as it requires less user experience and also does not require the user to keep a file on their computer, in addition to allowing them not to wait for programming or new episodes, since these are made available all at once.

Conviva (2020), a company specializing in integrated data intelligence, conducted a survey between March 3 and 23, 2020, which indicated that streaming services grew 20% globally compared to numbers from two previous weeks. As an example of this growth, we can mention Netflix, the leader in the segment, which during 2020 had an addition of 37 million new global subscribers, as pointed out in the Forbes report (2021).

A study conducted by the consulting firm Bain & Company (2020) states that the trend is for the demand for online entertainment services to remain high even after the pandemic. Luciana Batista, a partner at the firm, evaluates that "the pandemic has the power to accelerate trends that were already underway and that such sectors will reach a new normal from now on".

For these reasons, it is clear that this segment tends to become increasingly relevant to the market and consumers, so it is a good time to launch new ventures in this sector. But it is necessary to take into account that today there are already several players offering this type of service, so that to stand out it is essential to know potential consumers well in order to offer a differentiated experience.

Informed, demanding and well-served consumers

With globalization and the expansion of internet access, global consumers emerge who have access to marketplaces from all over the world, especially when it comes to digital services. Paixão (2012) stated that "The growth of the world economy in recent decades has opened space for a vertiginous increase in the number of companies operating in the same market. This intensifies competition and offers consumers an expanded offer of products and services".

In addition, considering that the process of acquisition and consumption of video streaming services takes place in a digital environment, it is important to take into account that today's consumer comes into contact with an interactive reality where they easily have access to a variety of sources of information. This situation allows them to become more informed and demanding1, which requires more dynamic relationships and instant responses2. For this reason, companies must seek to offer as much information as possible to their customers in an agile and dynamic way, present more advantages in the consumption of their products or services than their competitors and, at the same time, monitor the company's image on the networks. This is the work of Eduarda and her team of consultants.

Another important point brought up by PwC's Global Entertainment and Media Survey 2019-2023 (2019) is that consumers of online entertainment services increasingly expect personalized experiences according to their preferences, contexts, and schedules. According to a survey conducted by Adobe, 67% of respondents stated that it is important for users to obtain personalized content, based on their current context, and 42% believe that non-personalized content is inopportune (FOLLONI, 2021).

Thus, due to the large and growing supply of video streaming services and considering that "the decisions of individuals are dependent on the availability of resources and their relative prices and have as their objective the maximization that each individual makes of their well-being"3 a scenario arises where companies need to adapt to offer maximum personalization, in order to meet existing demands efficiently and strategically and not lose ground to the competition.

In fact, Eduarda thought: in this type of service, there is a lot of room for personalization. Regarding how the service is offered, for example, there are several models that vary according to the type of contracting (Annex 1), which can be: free or paid (punctually or as a subscription); ad-supported or advertising-free; unlimited access to a diverse content base or occasional access to certain content (through rental or purchase); streaming content from an existing traditional channel or library (as soon as it becomes available) or curating curated content.

Another aspect in which personalization becomes essential is in the variety of content offered. The consumer of this type of service wants to have the chance to choose between several alternatives – he will also consume more when there is a greater offer4. The devices that can be used to access SVOD platforms must also cater to different tastes. Computers, cell phones, tablets, and even televisions: there are several channels that streaming consumers use to enjoy audiovisual content. It is essential that platforms offer the most diverse alternatives in order to increase their reach.

In addition, the way online consumption is currently configured also impacts the expectation that the consumer of SVOD services has when enjoying audiovisual content, reflected in the desire to control the duration and time in which they will watch movies and series, in the opportunity to choose the content available, and also in the need to find opinions of other consumers on social networks or in forums intended for the discussion of Movie and TV Reviews5. This new spectrum of audiovisual entertainment consumption needs to be considered when thinking about strategies for this type of service.

The streaming market in Brazil: results of quantitative research with potential customers

Brazil also follows these trends. According to the Brazilian Association of OTT's (Abott's), a new report by the consultancy App Annie on the use of mobile applications around the world pointed out that Brazilians increased the time spent with video streaming services by more than 130% in 2019, compared to the previous year. Also according to Abott's, a recent Digital TV Research study on OTT and video forecasts in Latin America points to Brazil leading the way in SVOD revenue by 2024, with 40% of the regional total. This set of data contributed to the English streaming company's interest in entering the Brazilian market.

Eduarda, a specialist in consumer behavior, has long been dedicated to unraveling why individuals consume a certain product or service from one brand and not another - not based on the objective that the company primarily adopted for its offer, but rather seeking to understand the value that the offer particularly generates for those consumers. During her training at the University of Brasilia, she learned that consumer behavior refers to the analysis of the various attributes that the consumer takes into account, consciously or unconsciously, when making a decision to purchase a product or service of a certain brand. By understanding them, it is possible to act strategically so that the entire experience offered by the brand can take into account what really generates value for the consumer.

In addition, to carry out this project, she recalled important references brought by Kotler and Keller (2012) who, among other things, state that "environmental and marketing stimuli penetrate the buyer's consciousness, and a set of psychological factors combined with certain characteristics of the consumer leads to decision processes and purchase decisions". Thus, Eduarda realized that, in the research with customers, she would need to deepen the evaluation of which marketing stimuli (which are the attributes related to the service, such as general characteristics, brand strength, price, etc.) and, also, which sociodemographic characteristics of the consumer are more important and should be taken into account so that it is possible to develop strategies that generate a greater predisposition to purchase in consumers of SVOD services.

Eduarda also considered the complexity involved in the analysis of SVOD services which, as it is essentially a service, make the analysis of consumer behavior even more complex, since the value offered is not a tangible good, so that "the customer cannot easily appreciate it, as there is no physical or material component that allows an accurate analysis"[1]. Thus, she realized the need for a search for research that delimits the specificities of this service. His team then gathered some evidence to support the segmentation and pricing strategies they will design for the customer.

Using qualitative consumer research, his team found eight attributes considered the most important for the acquisition of this type of service (see Appendix 2 and 3 for more details):
• Variety of Content
• Speed of Throws
• Exclusive Content
• Connection Stability
• Video Quality
• Ease of Use
• Intelligence to target content
•Price

Then, so that they could delve deeper and bring elements to the decision of their contractor, they decided to carry out a quantitative research to get to know the Brazilian streaming consumer better. In this second stage of the consulting work, the relative importance of the attributes previously identified (Annex 3), the willingness to pay for each of these attributes (Annex 4), as well as the sociodemographic characterization of the respondents (Annex 5) were defined. They also chose to have a view of the current market, bringing examples of reactions from Brazilian streaming consumers on social networks (Annex 6) and prices of service packages (Annex 7).

In short, they identified that the most important attribute is the quality of the Video. In this way, they saw that this element should be treated as essential considering the digital nature of this type of service and also the technological advancement that is already seen even in traditional media today.

In this sense, it is necessary to consider that buffer technology, which allows viewers to watch movies and series in high quality and without the need for downloading, requires that the bandwidth used by users is higher than the transmission rate of the video, otherwise there will be cuts in playback. There is already a technology that reduces this problem by adapting the transmission rate to the speed and processing capacity of each user's connection – this technology is called adaptive streaming[2].

The attribute "Speed of Throws" appears next, in second place. With the emergence of the habit of binge-watching, that is, watching several episodes of series and movies at once, the need for the release of content to be faster and faster grows. In fact, it is clear that consumers of this type of service expect this from the companies they have chosen (Annex 5).

The third most important attribute and the one for which respondents are willing to pay the biggest difference (Appendix 4) was "Variety of content". It is natural that this attribute is very relevant, since these platforms need to offer personalized content for audiences of different tastes, ages, cultures, etc.

The fourth most important attribute was "Exclusive Content". Most SVOD platforms offer original content, created on their own and that often has a record audience. Through the creation of original content, SVOD companies are able to deliver more varied content that appeals to different audiences, even using the artificial intelligence of their algorithms to identify potential factors that will please viewers.

The fifth attribute in order of importance was "Intelligence to Direct Content". The use of recommendation systems based on intelligent algorithms has as one of its main uses the help for users to deal with an overload of information, enabling more relevant content and more assertive recommendations to users' preferences to be seen first[3].

Finally, "price", although also significant, was the least important among all attributes. This may be a consequence of the fact that the prices charged on most SVOD platforms are low when compared to other alternatives for the consumption of audiovisual content, such as pay TV, cinemas, or renting and buying movies or series individually, for example.

In addition, the influence of sociodemographic factors on the valuation of these attributes was also taken into account. In this sense, it was noticed that the "gender" factor did not present a significant influence on any of the attributes evaluated, that is, belonging to one gender or another does not seem to make a difference in the importance given to these attributes.

The sociodemographic factor "age" was significant for the analysis of three attributes: "connection stability", "ease of use" and "price". This indicates that for older people, these attributes are especially important. The first two attributes are linked to the digital nature of the service, and older people, as they are considered "digital immigrants", tend to have more difficulty with these aspects, so it is important to avoid more barriers being present. The importance of the "Price" attribute can be explained by considering that this type of platform is not usually a priority for older people, so that if the price is high, the tendency is for them to opt for another option.

Finally, with regard to the sociodemographic factor "income", two attributes were significant: stability of connection and variety of content. This indicates that, as family income increases, these attributes become more relevant. These two attributes are classified as experience attributes, that is, they are perceived throughout the use of the service, and are linked to quality and satisfaction of customer expectations. Consumers from classes A and B are seen as value-conscious, that is, concerned with the proportion between price and quality (MOWEN & MINOR, 1998).

Challenges for streaming companies: dynamic changes and the need for innovation

Given the understanding of the streaming segment and considering the peculiarities of the Brazilian market, Eduarda and her team will present suggestions for paths that the contractor should follow, so that segmentation and pricing strategies can be implemented that can lead to the platform's greater success in Brazil.

Eduarda advised her team to also seek a little more information that can be useful for building strategies. They then made a comparison between the prices charged by the company's main competitors in the country (Annex 7). With all this in hand, Eduarda is preparing her suggestions to take to a conversation with the contractor.

Discussion Issues

1. Should Eduarda consider other models of service offering, that is, incorporation of other types of VOD, in addition to SVOD?
2. Comparatively, analyze three real SVOD platforms present in Brazil in relation to the three most valuable attributes for Brazilian consumers. Which one stands out in the comparison?
3. How could the new company stand out in personalizing its SVOD service?
4. Analyze the willingness to pay for each attribute (annex 4) and also based on the prices charged by streaming services already on the market (annex 7), what price would you suggest to the contractor?
5. Put yourself in Eduarda's shoes and, considering the sociodemographic data and the influences brought by them identified by the survey, indicate which segmentation strategies the company should adopt.
6. Analyze the attributes that differentiate the main streaming brands in the Brazilian market. Then, check if there is consistency between the pricing adopted by them with the provisions to pay for each of the attributes identified in the market research.

Gallery and Attachments

Figure 1 – Streaming in Brazil

Figure 2 – Consumers and streaming

Annex 1 - Classifications of the video-on-demand service according to the form of contracting

Annex 2 - Attributes considered important for consumers of video streaming services

Appendix 3 - Order of importance of attributes for consumers of video streaming services surveyed in Brazil

Appendix 5 – Sociodemographic characterization of the respondents

Appendix 6 - Comments from streaming video consumers on the social networks of companies in Brazil (Netflix, on the left, and Prime Video, on the right).

Annex 7 – Comparison between the most basic offers and prices charged by competitors in the sector

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About The Authors

Ana Luisa da Camino Monclair holds a bachelor's degree in Business Administration from the University of Brasília (ADM/UnB). He also works in consulting in the area of marketing, market research and consumer behavior trends. Contact: anamnclr@gmail.com

Bruno Saboya de Aragão holds a master's and doctorate in Business Administration from the Graduate Program in Business Administration at the University of Brasília (PPGA/UnB). Substitute professor in the Department of Administration at the University of Brasilia, and also professor, researcher and coordinator of the Undergraduate Program in Administration at the School of Management, Economics and Business at IDP (EGEN/IDP). He also works in consulting in the area of marketing, market research and consumer behavior trends. Email: bruno.aragao@idp.edu.br ; brunosaboya@gmail.com

Helena Araújo Costa is an Associate Professor II at the Department of Administration (ADM/FACE) at the University of Brasília (UnB). She is the coordinator of Casoteca ADM. She has a doctorate in Sustainable Development (CDS/UnB), a master's degree in Tourism and Hospitality and a bachelor's degree in Administration. He teaches Contemporary Topics in ADM 1 and 2, and Introduction to ADM at UnB. Email: helenacosta@unb.br

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