Providers understand that keeping audiences around after they’ve binged the latest hits may require more than just good content. And given what they spend on marketing, advertising, discounts, free trials, and new content to acquire subscribers, it may make more sense for providers to retain subscribers at a lower price than lose them, at least right now. Churn will erode ROI and customer value, making retention essential. With greater cost sensitivity, subscribers may want more pricing options based on their usage and ad tolerance, and an easy way to move between tiers to meet their needs and level of engagement. Providers can also develop stronger, more customized user experiences, which would make it easier for subscribers to find content that fits their interests. By improving this interface, streaming video services can personalize the experience and strengthen the relationship they have with audiences.
Here are some questions streaming media providers can ask themselves to determine next steps:
• How can we get closer to customers to deliver engaging content, pricing, and advertising?
• Can we predict churn better, and then use membership perks to entice hesitant subscribers to stay?
• If younger people are becoming less engaged with more traditional video formats, does this represent a potential sea change for our business?
• How can we best leverage our intellectual property to engage with audiences on other entertainment platforms and entice them to use our services?
Generation Z could reshape the entertainment landscape
We saw that Generation Z has strikingly different entertainment preferences, often seeking video games and music before watching TV and movies. They have grown up with social media, instant messaging, video games, and live-streaming influencers. In fact, Generation Z could be viewed as early adopters who are influencing the behaviors of Millennials and Generation X—and possibly younger generations that follow them. This begs the question: Are M&E companies prepared for a future that could be shaped by Generation Z?
Video games were already growing significantly before COVID-19 but have been amplified during the pandemic.4 We found that 87% of Generation Z, 83% of Millennials, and 79% of Generation X said they play video games on devices such as smartphones, gaming consoles, or computers at least weekly. Many are playing daily to fill idle time, connect with friends, compete with opponents, and escape into stories. Most Generation Z, Millennials, and Generation X respondents said that during the pandemic, video games helped them stay connected to other people and get through difficult times. More than half of Millennials and Generation X said that video games have taken away time from other entertainment activities.5
When they aren’t playing video games—and even when they are—Generation Z is streaming music. In 2019, streaming music services generated around 80% of total music revenues across ad-supported and premium paid services.6 In 2020, streaming was one of the few bright spots for the music industry.7 One study showed that half of young adults ages 18 to 29 are streaming music every day.8
Generation Z isn’t alone in its love of music, however: Forty percent of respondents from all generations placed listening to music as a top-three favorite entertainment activity in our survey. Around 60% said they have a paid streaming music service, and the same amount use a free, ad-supported music service. For those who pay, the library of music was the primary reason, followed by an ad-free and reasonably priced experience. For those using a free, ad-supported music service, zero cost was the primary reason, followed by ease of access and access to a broad range of content. Most said they tune out ads, suggesting that advertisers on streaming music services face challenges for ROI.
Media companies and advertisers may still be video-first, but younger generations may not be. To understand this potential shift, providers can work through these questions:
• How can we better understand the nuances across different media?
• How can we leverage these channels to reach younger audiences, expand our brands, and bring more people onto our franchises?
• Does our strategy address the impacts of gaming, streaming music, and social media?
Social media: Everyone is at the party, but where is the trust?
Beyond connection and sharing, social media services have become common gateways for consuming music, video, games, and news. Empowering humanity to connect and broadcast globally, and the data economy that has risen around this milieu, has become so impactful that governments around the world are now wrestling to set limits on social media’s reach.9 At the same time, social media users are learning more about their role in the data economy. Now, there is tension between the value that consumers and businesses get from social media and the challenges of establishing trust, responsibility, and regulation.
Although social media reaches all generations, what they do on it varies by age. Among the emerging activities we asked about, Generation Z and Millennials both ranked listening to music as their top activity on social media. For Generation X, it was consuming news. The second most popular social media activity for Generation Z was playing video games, and for Millennials, watching TV shows and movies.
News at 11: Up next on social media
A recent survey from the Pew Research Center showed that 34% of US adults regularly get their news from social media.10 In our survey, one-half of Generation Z ranked social media as the No. 1 way they prefer to get news, and only 12% selected news from network or cable TV. Boomers are just the opposite: 58% said they prefer news on network or cable TV while only 8% said they go to social media first for news stories (figure 6).