In the digital era, streaming services have emerged as pivotal players in the entertainment industry, intertwining technology and content to deliver a seamless user experience. With such demand, one might think that streaming services have it easy. However, increasing competition and the ever-evolving landscape necessitate diversification strategies for sustainability and growth.
In the previous piece, we discussed the numerous challenges media providers, and streaming services, in particular, are facing. Building upon those conclusions, we’ll now delve into the solutions side of the equation – namely, the multifaceted world of diversification providing a comprehensive perspective applicable across various business sectors.
The Need for Diversification in Streaming
The streaming industry, initially dominated by a few, has witnessed an influx of new entrants intensifying competition. Consumers, now spoiled for choice, compel platforms to innovate to retain and expand their user base.
Diversification (as emphasized by Kaltura) is not merely a strategy but a necessity, ensuring platforms cater to varied consumer preferences, mitigate risks, and tap into multiple revenue streams. As seen in the depiction of the Ansoff Matrix below, diversification and the introduction of new products and/or the expansion of the target market is a proven strategy for reducing risk and increasing profits.
Image Credit: SpeakingNerd
The Many Faces of Diversification
As discussed in the previous article, moving away from a single-source revenue model is one of the keys to subscription services (and d businesses across all industries) staying competitive. Yet diversification isn’t a one-size-fits-all strategy. It can take various forms, from expanding on current product lines to venturing into unrelated markets. For streaming services, this means:
- Ad-Supported Models: Platforms like Hulu have introduced ad-supported models, providing users with a free or discounted version supported by ads. This not only attracts a segment of users who prefer not to pay but also opens up advertising revenue.
- Enhanced Subscription Strategies: Netflix’s tiered subscription models cater to different user needs, from quality to the number of screens, allowing them to reach a broader audience. Customization and personalization are proving to be some of the most appealing aspects brands can offer consumers, particularly those of younger generations.
- Merchandising and Product Collaborations: Disney+ leverages its vast array of characters and stories to produce merchandise, creating an additional revenue stream while enhancing brand loyalty.
- Product Bundling: Apple’s bundled services under Apple One, which combines streaming with other services like cloud storage and music, offers users value while increasing platform stickiness.
- Live Events and Experiences: Platforms can host live events, premieres, or fan meetups, turning virtual communities into real-world connections and generating revenue.
- User-Generated Content: Platforms like YouTube have thrived on user-generated content, creating a sense of community while diversifying their content offerings.
- Technological Innovations: With the rise of technologies like Virtual Reality (VR), platforms have the opportunity to offer immersive experiences, opening up new revenue avenues.
While media companies have made significant advances in diversifying their revenue streams, more untapped potential remains. Kaltura suggests that “In-app e-commerce, like within social media, could be the next step to squeeze the revenue-generating possibilities of that sweet moment when users are entirely engaged and watching their favorites. ”
Case Study: Diversification in Action
As highlighted by Insider Intelligence, Netflix and Disney+ serve as prime examples of successful diversification when it comes to introducing ad-based streaming—predicting the platforms where ad-based viewing originated to lose their hold on their market share.
Netflix, which started as a DVD rental service, transitioned to streaming and later into content production. That expansion of offerings that has kept them competitive in the face of new streaming services joining the market to compete for their share. Now, with Netflix’s offering of ad-based viewing for users who want to save on subscription fees, Netflix is reaping the benefits of their adaptability and creativity as it aims to nudge Hulu, YouTube, and Roku out of the top spots for revenue from ads.
Though relatively new to ad-based revenue, Disney+ and Peacock show even greater promise. Thanks to their ties to channels that already have an established hold in the streaming ad space, the strategy and systems are already in place. These two companies stand to surpass the competition, demonstrating that sometimes the solution lies in strategic partnerships with those who are already established in the field.
Challenges in Diversification
Implementing diversification comes with its own set of challenges, including maintaining brand consistency across varied revenue streams, managing technological integrations, and navigating through legal and ethical considerations. Additionally, there’s the challenge of ensuring that diversification efforts don’t dilute the brand or alienate core users.
Implementing diversification requires a strategic approach. It begins with identifying potential revenue streams, developing a strategic plan, and ensuring continuous evaluation and adjustment of strategies to align with market dynamics and consumer preferences.
Self-Reflective Guide: Questions for Business Owners
Business owners must consider:
- How can existing resources be leveraged to explore new revenue streams without compromising the core offering?
- What technological and operational adjustments are required to implement diversification effectively?
- How will diversification efforts align with the overall brand and mission?
- What are the potential risks, and how can they be mitigated?
As recommended by SpeakingNerd, an analysis of the competition and the market are musts as well before taking action to diversify offerings.
Future Prospects and Preparing for What’s Next
As the streaming industry continues to evolve, anticipating future trends, emerging revenue models, and preparing for upcoming challenges and opportunities is crucial to ensure sustained growth and relevance in the market.
In conclusion, diversification is more than just a buzzword; it’s a strategic imperative, especially in industries as dynamic as streaming. While the strategies discussed here are rooted in the streaming domain, the principles are universally applicable. Businesses (regardless of their industry) can benefit from a well-thought-out diversification strategy, ensuring sustained growth in an ever-changing market landscape.
Ready to unlock the secrets to navigating through the ever-evolving business landscapes? Dive into strategies, real-world case studies, and innovative approaches that pave the way for a resilient, future-proof business with our book on the “8 Pillars of Business Transformation.”