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Spotify and Hulu? How (and Why) OTT Partnerships Formed

Spotify and Hulu? How (and Why) OTT Partnerships Formed

The current TV landscape makes it difficult for streaming platforms to meet viewer demands and revenue requirements simultaneously. 

Take the scenario that Emily Todd VanDerWerff at Vox calls “topsy turvy:” Fans of the Netflix sitcom One Day at a Time hope a broadcast network will pick up the show after the streaming giant canceled it.

More broadcast networks are launching streaming platforms to make it even more interesting—think FOX NOW and Peacock.

It’s “just a sign of the times,” according to VanDerWerff. “The streaming revolution, which promised to break down lots of barriers in the TV industry, is beginning to morph into something else.”

It’s morphing into a giant. According to Kantar, more than 113 million households accessed streaming services as of September 2022.

Advertisers have responded.

By 2026, spending on connected TV (CTV) ads is expected to reach nearly $39 billion, up from $6.4 billion in 2019.

Part of that evolution has shaped over-the-top TV (OTT) partnerships.

For example, customers buying Verizon’s +play aggregator can get a free year of Netflix Premium

As the streaming wars intensify, partnerships like this will be common to attract advertisers and consumers alike.

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Bundling is Not a Thing of the Past

VanDerWerff compares these partnerships to the cable bundling that was born in the 1980s. 

And they may continue to define the ‘new-and-improved’ TV landscape in response to so-called subscription fatigue.

“Even people who work for the streaming networks understand that having a bunch of streaming networks, all with their own unique and in-demand programming, all asking you to pay between $10 and $20 per month, could end up being catastrophic to consumers,” VanDerWerff concludes. 

While more than half of Americans pay for more than one streaming service, there is a line they won’t cross. We know that because there’s backlash whenever a major player increases its price.

Netflix, for example, lost nearly a million subscribers in Q2 2022. While the root cause of that decline goes beyond price—content and an increasing number of alternatives had much to do with it—price played a role.

It’s worth noting that Netflix is back to its growing ways, adding 2.4 million subscribers in the third quarter of 2022. That said, introducing ads to its platform could push some users away as Netflix optimizes its ad strategy and potentially increases ad loads to drive revenue.

Nevertheless, companies and streaming platforms must work together to remain appealing to consumers. 

“The way telecommunications companies react to OTT content and communications will either be the key to their continued relevance or signal a never-ending decline in market share,” writes Kevin Cancilla at Vindicia. 

The Enemy of My Enemy is My Friend?

These new partnerships are tenuous at best, primarily since they are born out of necessity.

According to Brett Sappington at Ecommerce Times, several factors have driven the push for these partnerships: “High fragmentation of content, the success of bundling, polarization in subscriptions and revenues, a low cost threshold for survival, and low awareness of OTT service brands.”

At the root of each of these factors is the consumer drive for accessible content. If you don’t offer it, your competitor certainly will. 

Take Hulu and Spotify.

Bundling the TV and music streaming services was surely a way to stave off competition from Apple. Hulu offers TV, Spotify offers music — Apple will offer both in the form of Apple Music and Apple TV+.

In the same vein, the partnership between Verizon and YouTube seems to be a way for YouTube TV to maintain (or grow) market share and for Verizon to appeal to content-focused consumers. 

“The deal underscores Verizon’s ongoing efforts to play nice with third-party content providers to continue enhancing the array of services that consumers have to choose from at Verizon,” writes Ingrid Lunden at TechCrunch. “More options for content helps sweeten the deal and keep people from moving to other services, or away from any bundles at all and opting to create their own a la carte selections, cord-cutter style.”

Both examples of new OTT partnerships highlight what the future of streaming TV is shaping up to look like: Consolidated and fiercely competitive—and that’s ultimately good news for everyone involved, including advertisers.

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