Q&A: Xperi’s Geir Skaaden on ads, bundles and the future of streaming

Streaming providers are grappling with shifting consumer expectations, rising production costs and the growing demand for more affordable and personalized viewing options. Consumers are cutting back on the number of services they use, driven by economic pressures and frustration with subscription fatigue and content discovery challenges.

Geir Skaaden, chief products and services officer at Xperi, offers his perspective on how providers can address these challenges through strategies like bundled services, ad-supported models and improved user experiences.

His insights come as the latest TiVo Video Trends Report highlights shifts in consumer behavior, including a rise in ad-supported streaming services, now embraced by 64% of consumers—a 16-point increase over the past year.

How does Xperi define the current challenges facing providers and consumers in the streaming ecosystem?

One main challenge we’re seeing is that the discovery dilemma is continuing to worsen for consumers. The latest TiVo Video Trends Report revealed that 73% of consumers reported the need to use multiple apps in each viewing session – up from only 60% year-over-year – while also reporting that recommendations were less relevant regardless of the source. As a result, smart TV manufacturers must either build a custom OS or buy a third-party OS from a specialist provider to enhance the overall user experience and effectively meet consumer needs.

What key findings from the TiVo Video Trends Report are critical for the streaming industry’s growth?

Our research revealed that 77.8% of consumers are at least tolerant of ads. Interestingly, ad tolerance appears to be inversely correlated with age, with younger generations reporting higher rates of ad-tolerance year-over-year. At the same time, ad-tolerance has increased among respondents with higher incomes.

Streaming bundling gains traction as viewers cut back, TiVo study finds

Streaming platforms have a unique advantage in offering contextual advertising – ads that are relevant to the content viewers are watching. There’s an opportunity to explore more relevant, highly targeted ads for this audience as a means to minimize friction with the end user as opposed to traditional TV.

By leveraging this approach, the streaming industry has an opportunity to be more digestible and therefore sought after by consumers. As the industry grows, understanding and catering to consumer preferences will be key to its continued expansion.

Can you elaborate on the impact of rising production and content acquisition costs on the direct-to-consumer model?

In traditional media – envision a major Hollywood blockbuster – there was a pre-determined rollout. Today, when you have a direct-to-consumer model, unless you’re a very large and successful company, it’s a very different supply chain to navigate as you don’t have those front-end dollars confirmed in advance.

Advertisement

Today, these distribution challenges are coupled with rising production and content acquisition costs making it harder for providers to achieve profitability.

In turn, consumers are feeling the effects of multiple subscriptions and higher costs, leading to subscription fatigue and churn. Bundling services and leveraging ad-supported models can help mitigate these issues by offering more affordable options and generating additional revenue.

By focusing on targeted advertising and creating meaningful consumer experiences, streaming providers can reduce costs and improve profitability, ultimately benefiting both consumers and the industry.

How can providers better address the issue of subscription fatigue and high churn rates?

Any provider will tell you that getting a new customer can be expensive and you want to retain the ones you have. Finding the balance between subscription fatigue and growing demand for diverse content is a fine line providers need to walk.

To address subscription fatigue, you need to resolve the root of the problem which is subscriptions that don’t meet the needs of the end user and recommendations that aren’t aligned with consumer preferences. We’re seeing a rise in bundled services to address this exact dilemma. Well-designed bundles provide customization and personalization opportunities that help combat subscription fatigues and in turn lower churn rates.

Analysis: Cost-conscious viewers drive streaming’s ad-supported evolution

What role do bundles, such as those offered by telecom operators, play in reducing costs for consumers while benefiting providers?

The latest TiVo VTR found that 61.7% of respondents with a short-term interest in switching broadband services noted they were “likely” or “much more likely” to keep their broadband service if the provider bundled additional streaming services with internet.

Bundles are able to address evolving consumer needs effectively as they provide better choice, greater pricing flexibility and overall higher product value.

In turn, providers are addressing consumer needs and ensuring ongoing satisfaction. Some companies are able to subsidize and offer a stickier, more compelling service that keeps consumers consistently engaged as well. 

How do you see the balance evolving between ad-supported and subscription-based streaming models?

As new bundle options enter the market, we’re likely going to see more options that are tailored to individual household preference. These options blend free, ad-supported content with premium, subscription-based offerings given there are different entertainment preferences within households.

How does Xperi view the evolution of pricing differentiation in streaming services?

We expect to see more smart bundling options enter the market as well as a variety of tiered pricing options to accommodate user preferences and cast a wide net of users.

What factors do you believe are critical for streamers to achieve both scale and profitability?

While leveraging the advertising potential of smart TVs is important, it should not come at the expense of the user experience. The user experience should always come first. The end user should be in the driver’s seat at all times.

With shorter attention spans than ever, streaming providers and broadcast networks don’t have long to hook a person onto their content. By focusing all efforts on a positive end user experience, streamers can ensure overall product satisfaction and in turn reduce churn resulting in market growth.

Advertisement

How do you envision the role of platform operators, such as Roku and smart TV manufacturers, in shaping the future of streaming?

There is a strong case for centering the smart TV experience around consumers. Many of the current smart TV interfaces, because they are biased for an advertising play over anything else, are creating friction in the user experience.

Platform operators have an opportunity to prioritize the user experience while balancing advertising demands. One way to achieve this is by improving search and recommendation.

Instead of populating the search recommendations with unrelated advertisements for shows unavailable to the user, smart TVs can prioritize sponsored content that’s relevant to the user as appropriate – it’s important not to overdo this.

Consumers should have their TV experiences tailored to them and platform operators have a chance to make this the standard of the future.

What strategies could help streamers better monetize their content while maintaining affordability for consumers?

Although many consumers have a high tolerance for ads according to the last TiVo Video Trends Report, many smart TV interfaces prioritize irrelevant ads, hindering the user experience.

We saw this problem and debuted our own solution TiVo One, a cross-screen ad platform, earlier this year.

TiVo One combines ad inventory across multiple end-points in the home and the car, empowering advertisers to efficiently optimize campaigns to their desired audiences. With the addition of TiVo One, TiVo is balancing personalization for consumers with targeted and relevant ad placements, giving partners a solution that optimizes campaigns and keeps consumers happy by ensuring a seamless user experience.

This approach helps monetize content in a way that resonates with consumers.

In addition to strategic, personalized advertising, streamers can also leverage ad-tiers to provide differently priced offerings to not only cast a wider net of end users, but also cater to the finances of every household. 

Where do you see the streaming ecosystem heading in the next few years, particularly in terms of consumer behavior and technological advancements?

Overall, the streaming market is poised for meaningful growth on a global level.

Advertisement

There has been a migration away from only traditional media players dominating in the U.S., towards steaming which we’ll see more of. Existing big tech players such as Amazon, Google, and Apple, who are now notable players in the U.S. streaming landscape, will likely make that same headway in European markets. Market ownership is shifting, and consumers are holding providers to higher standards. The streaming players who actively listen and help empower the consumer to choose will be the ones to see success within the constantly evolving streaming ecosystem.