Beating Subscription Fatigue: The Pivot to Ad-Supported Growth

With viewers getting tired of spending on subscriptions, streaming providers are forced to seek out new revenue streams.
Things are getting complicated and having the right technology will be key to embracing new opportunities for revenue generation. 

The Streaming Wars Enter a New Phase

The first stage of the streaming revolution was defined by explosive growth. Consumers eagerly subscribed to multiple platforms, creating a golden era for subscription-based media services.

That era has drawn to a close.

Helped by the Cost of Living crisis, consumers are being forced to reconsider their spending priorities. Around 36% of British consumers say that streaming subscriptions would be one of the first things to go if cuts were made.

Recent industry data from Self Financial shows that the average number of household subscriptions in the United States dropped from 4.1 to 2.8 within a single year. This isn’t something just happening on the other side of the Atlantic.

In the UK, a 2024 survey conducted by YouGov on streaming churn discovered that 31% of the 2000 consumers polled had cancelled at least one streaming service in the last 12 months alone. A further 39% said they expected to cancel at least one subscription in the 12 months that followed.

The Return of Advertising

To offset subscription declines, major streaming platforms have begun reintroducing advertising into their business models.

Companies such as Netflix and Disney have launched ad-supported subscription tiers designed to offer lower monthly costs in exchange for limited advertising exposure.

These hybrid subscription models have expanded rapidly and this shift can’t be ignored. It’s a complete restructuring of how digital media is monetised.

However, operating both subscription and advertising-based models simultaneously introduces significant technical complexity.

The Challenge of Changing Revenue Streams

Media companies must now manage an increasingly intricate revenue ecosystem involving:

1. - Multiple subscription tiers
2. - Dynamic advertising pricing models
3. - Rights and royalties payments in the form of millions of micro-transactions across global markets
4. - Connected TV performance analytics
5. - Subscription billing
6. - Advertising revenue streams
7. - Bundled service packages
8. - Promotional pricing models

The traditional billing infrastructure of a media organisation is rarely designed to support this level of complexity. Yet, without a robust revenue management framework, companies risk losing visibility over financial performance.

How SAP Solves the Monetisation Puzzle

SAP S/4HANA is a modular solution that can be built with different components to deliver the capabilities your business needs. One such module is SAP Billing and Revenue Innovation Management. This is a modern billing and revenue management platform that enables media organisations to operate hybrid monetisation models efficiently. It does so by supporting three critical capabilities:

1. Agile Billing

Streaming services process millions of transactions across different pricing tiers and geographical markets.

A sophisticated billing system enables organisations to manage:

1. 1) Subscription billing
2. 2) Advertising revenue streams
3. 3) Bundled service packages
4. 4) Promotional pricing models

All within a single unified platform.

2. Data-Driven ROI

Connected television has created a new generation of measurable advertising metrics. When it comes to analysing returns, advanced analytics allow organisations to track the relationship between advertising investment and audience engagement. This enables brands to optimise campaign performance.

So, instead of calculating reach, Connected TV means we can look at results. As the boundaries between entertainment and revenue generation blur, this will become increasingly valuable.

3. Cost Management

Revenue growth is only part of the equation.

Modern workflow tools help media organisations validate invoices, manage supplier relationships, and maximise available regional production incentives. With a growing number of suppliers, increasing costs and broader geographical spread, the management of cost has become extensively more complex.  And that's before you take into account transactions that span countries and currencies. 

The use of such workflow tools and the potential benefits of AI and ML in this area offer the perfect antidote to such complexity and allow companies to capture revenue opportunities and minimise operational waste.

Switching the income stream

In the evolving streaming economy, success is increasingly defined by operational agility.

The platforms that thrive will be those capable of combining compelling content with sophisticated monetisation infrastructure. Those that thrive will, by default, be those with the infrastructure to move with agility, operate with efficiency and grow with confidence.

Understanding your technology stack and its capabilities is one thing, but if you're thinking of migrating to SAP, knowing how ready you are for migration is something that could put you off before you even reach the starting block. By using a pre-programme solution to identify exactly where you are and where you need to be before you get started on migrating to new technology, you can dispel the confusion and identify a clear way forward for your business. 

One thing's for sure. As the media industry continues to evolve, organisations must ensure their revenue management systems are capable of supporting the next generation of hybrid business models. There’s no debate that digital transformation may be a costly project, but it will never be as costly as the obsolete technology stack.