Streaming Brands Are Scavenger Brands

Streaming brands have become scavenger brands. Streaming brands are focused on scavenging for new subscribers with little focus on current customers. Scavenger brands survive by relentlessly seeking larger subscriber numbers to satisfy investors and analysts. Scavenger brands are the hunters and gatherers of the modern age. A streaming brand’s stock price and image are dependent on showing a larger and larger user base. Netflix suffered a serious decline in its stock price when it announced that it did not meet subscriber expectations and actually lost customers. The loss of around 200,000 customers erased about $80 million from the brand’s bottom line.

There are two critical brand issues that streaming brands push to the side. 

First, love your core customer.

No brand can survive on acquisitions alone. A brand needs both new customer and current customers. Current customers should be maintained and respected and loved. Current customers are valuable. If they really enjoy the brand’s experience, current customers will be willing to pay more. They will look for additional ways in which to experience the brand. 

Streaming brands are focused on growth. Disney’s CEO, Bob Chapek, indicated in a recent earnings call that Disney+ is focused on growth targets between 230 million and 260 million. Right now, Disney+ has 137.7 million. This reflects an increase of 7.9 million subscribers since the last quarter. Disney never mentioned retention of current customers in its earnings call. Disney also owns streaming brand Hulu. Hulu has 41.4 million viewers.

Warner Bros. Discovery’s HBO Max is focused on growth as well. The brand currently has grown to 76.8 million viewers. This is 13 million more than a year ago. Warner Bros. Discovery has indicated that HBO Max will be combined with its other streaming brand Discovery+ with 23.5 million users.

Paramount+ indicated that it had grown its subscriber base to 40 million. This is an increase of 6.8 million over the last quarter. In its earnings call the word “retention” was only used once. Paramount+ management believes that its library of content is what will “retain” its subscribers. Of course, Disney and HBO Max say the same thing.

Netflix did not have such good news as the brand lost customers and did not meet expectations on acquisitions. As Jason Aten points out in Inc. magazine this is probably because Netflix has no one left to sign up. “There comes a point when you are the largest streaming service, that it’s difficult to find people who are not already subscribers. You would think that would be considered a win, except that shareholders want to see growth, even when you are as big as you are reasonably going to get.” Netflix already has 214 million subscribers. Growing at the same rate as when you were smaller is extremely difficult. Disney+ and paramount, for example, have much smaller bases to build upon. When it comes to streaming, it is all about winning the acquisition war.

Growth is good, of course. But, all you seem to obtain as a subscriber is the ability to watch whatever you want for a fee. At some point, you may have watched what you signed up for and, with nothing else new to watch, you may cancel and move on to the next shiny new streaming service. Where is the additional value for the subscriber?

As a potential streaming customer, you are wooed with various tiers of viewing, some with advertising, some without advertising. So, you are able to choose a plan that works for you. But, once you become a user, you become a loser. Once you are a customer, your value to the brand is your monthly subscription fee. Sure, you are able to watch content, but you are just a number to please Wall Street. 

Scavenging for new customers at the expense of loving your current customers is a strategy for disaster. Brands need to reinforce customer attachment. Special deals will attract new customer. But these may not be the customers you want. They may sign up for some special movie and then leave. They may be loyal to the deal rather than the brand.

Netflix is learning this lesson. Recent survey data show that in the first quarter of 2022, Netflix lost 3.6 million subscribers. Of these, 60% had been Netflix viewers for under a year. Additionally, Netflix’s focus on acquisition of new customers led to a 13% loss of loyal customers, those who have been with Netflix for 3 years or more. 

Although not a streaming brand, The Wall Street Journal is a great example of a subscriber brand that offers a wide variety of experiences for current users. There is a weekly members-only newsletter of events, offers, insights and experiences package including trips, discussions, free audio books, educational courses, cooking classes, virtual tours and passes for galleries. The Wall Street Journal focuses not just on finding new readers to subscribe. The paper also focuses on ensuring that current readers have an expanded experience beyond news.

Second, Have a relevant differentiated Brand Promise

It is common marketing sense to focus on current customers as well as new customers. But, to do this successfully requires the brand to have a relevant, differentiated brand promise relative to competitors. What brands do not want is for customers or potential customers thinking that all the brands are the same. Although the streaming brands see themselves as relevantly differentiated from each other, tiered offers and content seem to be the selling points. The problem with this is that not only are tiered offers and content features, not benefits, but tiered offers and content are greens’ fees or table stakes. They define the category.

A brand promise goes beyond just describing the category: it is a multi-dimensional. It defines the parameters for all development, communications, innovation and renovation on behalf of the brand. A brand promise defines the special relationship between the brand and its users. The brand promise describes what the brand intends to stand for in the mind of a specific group or customers or prospects. The brand promise is future-focused: it tells us what the brand will do for the customer. 

The brand promise defines the brand’s essential relevant differentiation. It succinctly articulates the values of the core customer, the benefits these customers seek from the brand, the personality of the brand and its features. It is not enough to merely define the features.

If streaming brands want to scavenge for something important, they should be scavenging for their relevant differentiation. Disney+ alludes to the fact that their content is safe for people of all ages. But, again the default is the content. This is too bad. As a business, Disney had as its differentiator the creation and delivery of happiness. Disney was safe, magical, high quality, and affordable for anyone and everyone, regardless of age. Why is this not reinforced with customers, investors and analysts? Surely, this purpose relevantly differentiates Disney from Paramount+, Netflix, Warner Bros. Discovery? Disney+ will need a relevant differentiator. As one media analyst told The Wall Street Journal, “While it seems Disney+ is winning the subscription battle for now, let’s not forget it is late to the streaming party. It will see subs (subscriptions) losses at some point.”

In a recent article for Vanity Fair, Joy Press talks about the streaming marketplace and the ways in which streaming is changing. She notes that the streaming marketplace is “overcrowded” and that streaming brands are “uncertain about how to keep expanding (and retaining) their subscriber bases.” She discusses the internal agita of the brands as they are torn between creating segmented, niche, sometimes unconventional content and broadening the appeal of shows for the mass market. Ms. Press says that currently there is enormous pressure “… to be all things for all people.” 

Brands need focus. They need to have a handle on their prime prospects and like-minded others. Having a brand promise that relevantly differentiates the brand’s experience is what will keep current customers loving a brand when there are no new customers available anymore. 

Being a scavenger brand is bad for business. Having an acquisition-focused strategy at the expense of nurturing loyal customers will eventually take its toll. Loyal customers will leave the brand for better options. This is already coming true for Netflix. In a highly competitive category, with each rival offering quality entertainment, loyal customers have plenty of options.

Furthermore, even in entertainment, brands must have relevant differentiated promises. 

In describing the “up-fronts” – the event where the media showcase their offerings to entice advertisers to buy ad time – The New York Times reported that streaming media were “taking center stage”. Streaming media previewed trailers of movies and series hoping to capture percentages of advertisers ad budgets. All of the streaming services with ad-supported offerings gave the same kind of presentations: here are the shows we will be featuring. As told to The New York Times, there is a real shift in the media industry. The upfronts used be all about the TV networks, but now streaming media are upending that model. It makes sense in this competitive environment that streaming brands stand for something relevant and differentiated to stand out from the rest of the crowd. “My content is better than their content” will only work for a little while. Netflix is a great example that relevant differentiation is critical.

Brands survive and generate high quality revenue growth when they drive both quantity of growth and quality of growth while offering a relevant, differentiated trustworthy experience.