Analysis of the Success Factors of SVOD to reach Generation Z

Table of Content

II. Table Of Figures

III. List Of Abbreviations

1. Introduction
1.1 Problem Statement
1.2 Research Purpose
1.3 Course of Investigation

2. Literature Review
2.1 Key Success Factors (KSF)
2.1.1 Key Success Factors Research
2.1.2 Systemization of Key Success Factors
2.1.3 Identification & Measurement of KSF
2.2 Media Usage of Generation Z
2.2.1 Definition of Media
2.2.2 Uses & Gratification Theory
2.2.3 Understanding Generation Z
2.2.4 Media Usage Behavior of Generation Z
2.2.5 Key Success Factors in Media
2.3 Subscription Models in the Media Industry
2.3.1 Subscription Video On Demand (SVOD)
2.3.2. Best Practices
2.4 Theoretical Consolidation of KSF

3. Case Study Mtv+
3.1 Analysis of Key Success Factors
3.1.1 Marketing
3.1.2 Content
3.1.3 Functionality
3.1.4 Sociability & Price
3.1.5 KSF of MTV+

4. Empirical Research
4.1 Research Method
4.2 Questionnaire Design
4.3 Data Collection & Sampling
4.4 Data Analysis
4.5 Research Findings
4.5.1 Sociodemographics
4.5.2 SVOD Usage Behavior
4.5.3 SVOD Usage Preferences
4.5.4 Attractiveness of MTV+

5. Recommendations For Mtv+

6. Conclusion
6.1 Answer to Research Questions
6.2 General Conclusion
6.3 Limitations & Future Outlook

IV. Bibliography

V. Annex
Annex 1: Usability Test of MTV+
Annex 2: Questionnaire Design
Annex 3: Questionnaire Results

II. Table of Figures

Figure 1:Identification of KSF

Figure 2:Average share of linear / non-linear usage in %

Figure 3:Building blocks of successful media products

Figure 4:Revenue share of pay-VOD segments based on 1,1 Bn. € in 2017

Figure 5:SVOD market share in Germany, in Q3 2017

Figure 6:Main motives for Amazon Prime Membership

Figure 7:SVOD KSF framework

Figure 8:Content overview of MTV+

Figure 9:Overview of influencer campaign

Figure 10:Age of respondents

Figure 11:SVOD service usage

Figure 12:SVOD payment behavior

Figure 13:SVOD usage frequency

Figure 14:Device usage for SVOD

Figure 15:SVOD gratifications

Figure 16:Preferred type of genre

Figure 17:Impact of content items on customer value

Figure 18:Impact of functionality items on customer value

Figure 19:Impact of price and sociability items on customer value

Figure 20:Preference of Netflix vs. Prime Video

Figure 21: Awareness of TV channel MTV

Figure 22:Interest in MTV+ usage

Figure 23:Willingness to pay for MTV+

Figure 24:Overview of potential segments for MTV+

III. List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

In this section, a discussion of the research problem followed by the purpose of the research is given. The course of investigation is later covered. The research questions are presented along with the research objective.

1.1 Problem Statement

Subscription video on demand (SVOD) services enable viewers to watch an unlimited amount of video library content for a monthly fee with the option to access the service on a number of different devices (Martens & Herfert, 2013, p. 103). Viewers now have the ability to select and consume content on a platform and device of their choice, wherever and whenever it suits them. In Europe, the SVOD market is projected to grow over the next five years to reach $6.8 billion in revenue in 2022, up from $3.9 billion in 2017 (Hamza & Chandakas, 2018, p. 42). In Germany, SVOD services will be the major source of video entertainment from 2018 onwards according to a forecast by GfK (GfK, 2018, 59). With a massive number of new SVOD offerings, the SVOD market is becoming a fiercely competitive field. One company that has entered the SVOD market is MTV. In December 2018, MTV has announced the launch of their SVOD channel on Amazon Prime Video (Prime Video), which is marketed as MTV+. The entertainment brand MTV was once the epitome of pop-culture and street fashion and one of their main target groups is Generation Z (Gen Z), which is the population segment born in 1995 or later (Scholz, 2014, p. 33). Gen Z is described as the most digital savvy generation that is driving the world towards digitalization. Moreover, Gen Z members are described as early adopters of SVOD as they had access to SVOD content for a majority of their lives. However, with the increasing range of SVOD offers, MTV+ will need to deliver on key resources and strategies that set them apart in order to survive and thrive. That spans a lot of areas such as content, price, marketing and form/design and raises the question of key success factors (KSF) of SVOD services.

1.2 Research Purpose

The objective of the present thesis is the identification and analysis of KSF of SVOD in order to attract Gen Z. It seeks to understand and examine SVOD usage behavior and preferences within the audience of Gen Z. After the determination of KSF geared towards the user expectations and preferences of Gen Z, implications and recommendations for the newly launched SVOD channel MTV+ will be identified. Three research questions were central to the present study:

RQ1: What is the SVOD usage behavior of Gen Z?

RQ2: Which KSF are perceived as valuable by Gen Z?

RQ3: How should MTV+ design their SVOD offer in order to attract Gen Z?

1.3 Course of Investigation

There are six chapters to this thesis. The first chapter is the introduction, which provides the problem statement, its purpose, relevant research questions and the course of investigation. The second chapter presents a literature review. It is organized into four parts: the first part reviews academic literature relevant to research on KSF. The second part of the literature review sheds light on the uses and gratification theory (UGT), focuses on different aspects of the media usage of Gen Z and introduces KSF in media. The third part presents subscription models in the media industry, on overview of the SVOD market and a best practice analysis with relevant players. The last part of chapter two summarizes the literature review findings to develop a SVOD KSF framework. Chapter three makes use of the previous developed framework and analyzes the KSF of MTV+. The fourth chapter is the methodological framework of the study including the research method, questionnaire design, data collection and sampling, data analysis and research findings. Chapter five introduces recommendations for MTV+ based on the empirical research. The thesis concludes with chapter six, which gives answers to the research questions, a general conclusion, the limitations of this study and suggests topics in need of further research.

2. Literature Review

The following chapter aims to provide a theoretical foundation in order to answer the research questions. The chapter starts with providing theoretical insights on KSF research. A discussion on the media usage of Gen Z is presented in the next part followed by an overview of the SVOD industry.

2.1 Key Success Factors (KSF)

2.1.1 Key Success Factors Research

According to Grunert & Ellegard (1992), the main suggestion of KSF research is “that there are a few selected KSF, which are decisive for the success” (Grunert & Ellegaard, 1992, p. 2). In a definition by Rockart (1979), KSF are described as “the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization” (Rockart, 1997, p.85). Identifying the factors, which contribute to economic success, is the central ambition of business activities, which requires a careful and constant review by the company (Amberg et al., 2005, p. 1). To highlight the importance of KSF in the formulation of a business strategy, Grunert & Ellegard (1992), described KSF as a competitive advantage of a business, in terms of “skills and resources with high leverage on customer perceived value and relative costs of a business” (Grunert & Ellegaard, 1992, p. 1). From a strategic point of view, this implies, that the cause of that competitive advantage is the investment in major skills and resources in order to be successful in a specific market. It can be argued, that creating customer value is dependent on specific skills and resources of the company, which represent KSF. In reverse, the differences in perceived customer value on the market can be explained by the KSF of a company (Grunert & Ellegaard, 1992, p. 17). This thesis will adopt the definition of Grunert & Ellegaard (1992) in order to emphasize KSF that create customer value for Gen Z.

2.1.2 Systemization of Key Success Factors

KSF can be classified into several different dimensions. The following part will review the most common dimensions:

Hierarchy vs. Group:The following systematization implies that KSF belong to a particular industry, corporate or sub-organizational level. The identification of KSF can be determined either on a cross-industry level or on a specific industry level. With the need of increasing specification, the success factor analysis can be restricted to specific groups of companies or to just one singular company (Schmalen et al., 2006, p. 2).

Internal vs. External:This dimension can be distinguished by internal and external KSF. Internal KSF affect the business itself and its employees. Mostly, the management is able to control and influence internal factors. In contrast, external KSF derive from environmental and market-specific dimensions, which cannot be influenced by the management (Wolf, 2006, p. 142).

Building vs. Monitoring:A regular review of the situation of an existing situation is related to monitoring KSF. Building KSF deal with managing the organization with respect to future planning. For example, a company has control and influence on customer relationship management, which is a building KSF, whereas changing consumer demographics and needs represent a KSF, which has to monitored and observed by the company (Wolf, 2006, p. 143).

Perceived vs. Actual KSF: Managers might perceive KSF differently as they are influenced by past experiences and other cognitive biases, which result in differences in perceived and actual KSF. Another reason is that, businesses want to align their own specific goals and needs in prioritizing KSF, which might lead to discrepancies in KSF (Amberg et al., 2005, p. 5).

2.1.3 Identification & Measurement of KSF

The analysis of customer requirements plays an important role in identifying KSF as they have a distinct influence on the perceived customer value. Essentially, customer value involves an extraordinary delivery on service, quality, image and price (McFarlane, 2013, p. 64). The identified success factors should be consistent with the customer’s opinions and needs on a given market, in order to allocate organizations’ skills and resources better. It is recommended to build KSF “from the viewpoint of the customer and focus on the functions, activities and practices which bring the most value to the customer” (Grunert & Ellegaard, 1992, p. 18). Moreover, it is necessary to link KSF to specific market characteristics (Grunert & Ellegaard, 1992, p. 19). Besides, the importance of understanding customer needs and preferences, Grant (2010) identified the analysis of competition as another criteria for identifying KSF (Grant, 2010, p. 88). The following figure illustrates his approach:

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Figure 1 :Identification of KSF (own illustration based on Grant, 2010, p. 88)

Another crucial element of KSF, is the development of measurable and comparable metrics in order to operationalize success. It is defined as the superior business's performance compared to its competitors measured by key performance indicators such as return on investment or profit. These metrics can be of quantitative and/or qualitative nature. However, determining success should not solely rely on financial results because differences in the companies’ accounting systems may lead to distorted results. Further, quantitative variables do not reveal any indicators on the company's long-term survival in a specific market. The consideration of qualitative variables is as equally important as quantitative variables (Schmalen et al., 2006, p. 3).

2.2 Media Usage of Generation Z

The following chapter starts with the definition of media and an introduction into UGT. It sheds light on Gen Z and its media usage behavior followed by the analysis of KSF in media.

2.2.1 Definition of Media

There are several definitions on the term media from different scholars. But the complex dimensions of media makes it difficult to create a clear and delimiting definition of media (Kiefer, 2005, p. 15). The term media is derived from the latin word “medius”, which can be translated as “middle”, “medium”, or something “mediating” (Wirtz, 2013, p. 14). Media are commonly referred as means of communication, which can be enhanced and transformed through technical instruments for distributing messages via words, images and sounds (Wirtz, 2013, p. 16). Moreover, media are not just communication channels and technical instruments for the distribution of public messages, but also present complex organizational forms with specific functions and capacities such as newspaper publishing companies or TV station companies (Kiefer, 2005, p. 16). According to Dittmar (2011) media can be differentiated into four categories, namely primary, secondary, tertiary and quaternary media. Primary media do not require any technical devices. One example is the human voice which is used when two people communicate and exchange information. Secondary media need technical devices for transmission but not for reception. Typical secondary media are newspapers, magazines and books. In contrast, tertiary media are dependent on technical devices for transmitting and receiving certain content. For instance, TV and radio require certain recording technologies to transmit content, whereas the recipient needs a receiving terminal, such as a TV and a radio device. Quartier media, which are also classified as digital media, require an Internet connection between the transmitter and receiver (Dittmar, 2011, p. 41 ff).

2.2.2 Uses & Gratification Theory

The following chapter focuses on elaborating the theoretical foundation on media usage behavior. One of the most important theories in the media usage research is UGT which examines the motivations, behavior and needs of the audience, or how and why they use media (Bryant & Thompson, 2002, p. 128). According to Ruggiero (2000, p. 4) the interest on uses and gratifications started in the 1940s with research initiatives on the origins of audience engagement with different media forms, such as listening to the radio or reading the newspaper. Scholars have identified several basic consumptions in regard to UGT. The major assumption of UGT is that the audience is active and that their media use is goal-oriented. The audience actively selects specific media and specific content to determine specific gratifications and to satisfy their individual needs (West & Turner, 2014, p. 406). Another assumption emphasizes the influence of social and psychological factors of each individual audience member on their communication behavior. Lastly, uses and gratifications scholars outline, that media compete with other forms of media to gratify certain needs of the audience (Bryant & Thompson, 2002, p. 131). Most uses and gratifications research has identified the following needs for media use among audience members: search for information and knowledge, relaxation, escapism, enhancing connections with friends and family, which can be classified into cognitive, affective, social and personal motives (Katz, Blumler, & Gurevitch, 1973, p. 512). Another classification is proposed by Stafford, Stafford and Schkade (2004), who describe three dimensions related to the usage of Internet:

1. Content gratifications:The content which is carried by the medium relates to content gratifications. The audience will be affected by the messages carried by the medium. The media usage may include affective motives such as entertainment and escapism.
2. Process gratifications:The experience of the media usage process relates to process gratification (e.g. Internet surfing or experiencing a new technology). As the audience is concerned with the actual use of the medium itself, process gratifications deal with the audience’s satisfaction on the usage and appearance of the medium.
3. Social gratifications:This gratification relates to interpersonal communication, interaction and social networking with other people via Internet applications or websites (Stafford, Stafford, & Schkade, 2004, p. 267 f.).

The selection of specific media channels is specified by the needs and gratifications sought. Therefore, it is important to recognize and understand the underlying motives of the media usage of Gen Z in order to design market offerings that are more responsive to consumer needs and which ultimately leads to a greater degree of consumer value. This thesis will consider the systematization of gratifications by Stafford et al. (2004) in order to define KSF to reach Gen Z.

2.2.3 Understanding Generation Z

The categorization of indivuduals based on common opinions, actions, behaviors and traits and shaped by one’s generation rather than by age is the major assumption of the generational theory. The common view for the classifications of generations can be divided into four generations (Scholz, 2014, p. 33):

- Baby Boom (1950-1964)
- Generation X (1965-1979)
- Generation Y (1980-1994)
- Generation Z (1995 -...)

Growing up with computers and innovational breakthroughs, technology and Internet has strongly influenced the consumer behavior of Gen Z (Özkan, 2017, p. 151). Gen Z was born from 1995, that means people aged 24 and younger by the year 2019 (Scholz, 2014, p. 33). This cohort is comprised of today’s young adults, teenagers and pre-teens (Villa & Dorsey, 2017, p. 4). According to a survey by Statistisches Bundesamt, approximately 9.4 million of German citizens were between 14 - 24 years old by the end of 2017 (Statistisches Bundesamt, 2017). Gen Z is the first generation to have grown up with Internet. Without a surprise, the Internet is also one of their favourite media activities. A study by the Medienpädagogische Forschungsverband Südwest (mpfs) investigated the preferred media activities of Gen Z in their leisure time. Their favourite activity is the usage of Internet (91%), followed by smartphone (94%), music (84%) and online-videos (65%) (Feierabend, Rathgeb, & Reutter, 2018, p. 13). Understanding the consumer behavior of Gen Z is crucial to any business in order to adopt their marketing strategy according to the needs and decision making process of Gen Z. What influences the purchasing decisions the most is the recommendation of their friends and family. But they also place huge importance on the testimony of past customers, online ratings and online reviews before making a purchase decision. Gen Z is also very cost conscious as 45% of Gen Z state that costs play the most important role when making a purchase (Gutfreund, 2016, p. 246). According to a study on the consumer behavior of Gen Z, 65% of the respondents stated that they want “to get real value for their money with discounts, coupons, and a rewards program” (Cheung et al., 2017, p. 7). Although they do not have a strong spending power yet, Gen Z wield a significant influence over family purchases (Cheung et al., 2017, p. 7).

2.2.4 Media Usage Behavior of Generation Z

The following chapter aims to shed light on the media usage behavior of Gen Z and the underlying uses and gratifications themes for specific media consumption habits.

Media Habit - Social Media

Gen Z prefers to communicate and interact online with people more than other generations before. Many of them also follow and observe the lives of online influencer or celebrities. Gen Z members are present on various social media platforms: Whatsapp (95%), Instagram (67%), Snapchat (54%), Facebook (15%), Pinterest (10%) and Twitter (8%) (Feierabend, Rathgeb, & Reutter, 2018). A study by DAK investigated the time spent on social media and found out that the average daily time spent on social media amounts up to 166 minutes. Girls spend on average more time on social media as compared to boys (girls: 181,7 minutes, boys: 151,3 minutes) (Internationales Zentralinstitut für das Jugend- und Bildungsfernsehen, 2019, p. 36). The activities on Instagram for example involve consuming the content of people they have followed, commenting on pictures/videos and posting pictures of oneself (Feierabend, Rathgeb, & Reutter, 2018, p. 41). In a study on the social media usage of Gen Z, Prakash Yadav & Rai (2017) proposed two social media motives: need for involvement and information and interaction with other people (Prakash Yadav & Rai, 2017, p. 110).

Media Habit - Mobile Phone & Multimediality

Getting their first phone is one of the most important life events for Gen Z. Named as the mobile generation, today’s teens got their first phone when they were around 12 (Think with Google, 2016, p. 3). Smartphones rank highest in the device ownership of Gen Z. Almost all member of Gen Z (97%) possess a smartphone (Feierabend et al., 2018, p. 6). The main mobile phone activity of Gen Z is using the Internet, which can be classified in different activities: communication (35%), entertainment such as music and videos (31%), gaming (24%) and information research (10%). The platforms YouTube (63%), WhatsApp (39%), Instagram (30%) and Netflix (18%) are viewed as their favourite apps on their mobile phone (Feierabend et al., 2018, pp. 34 ff). A study on the mobile phone usage identified that teens appear to seek more entertainment gratifications, whereas university students are more motivated by communication functions (La Ferle & Edwards, 2009, p. 52). Besides growing up with a mobile phone, Gen Z members also have access to a variety of other media devices in their household. In 2018, almost all German households were equipped with a computer/laptop and access to Internet (98%), whereas TVs were available in 95% of households. In addition, 71% of all families had a gaming console and 67% a tablet (Feierabend et al., 2018, pp. 34 ff). The habit of parallel media usage and media multitasking can be increasingly observed within members of Gen Z. For instance, when they watch TV, many of them integrate their mobile phones, tablets or laptops into the viewing experience for social media purposes such as texting their peers or gaming (Hulu, 2017). With the use of multiple screens for one activity, Gen Z expects a seamless and error-free user experience across different screens (Goldmedia, 2015, p. 44).

Media Habit - Streaming

Gen Z grew up in a household with a variety of streaming offers. 77% of all families have the possibility to view content via video streaming services such as Netflix and Prime Video and 68% of all families use music streaming services such as Spotify (Feierabend et al., 2018, p. 7). Figure 2 shows the development of linear and non-linear TV usage from 2016 to 2018. It can be seen that classical TV viewing (linear) had the strongest decrease (-38,4%) in the age group from 14-29 years old (2016: 46,6%, 2018: 28,7%), whereas the usage of video on demand (non-linear) had a significant increase of +54,1% (2016: 36,2%, 2018: 55,8%) (Die Medienanstalten, 2018, p. 47).

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Figure 2 :Average share of linear / non-linear usage in % (Die Medienanstalten, 2018, p. 47)

As Gen Z is the first generation to grow up with on demand content, it is no surprise that Gen Z makes up the highest share in the streaming population (Die Medienanstalten, 2018, p. 47). The platforms YouTube (60%), Netflix (47%) and Prime Video (22%) are used most frequently by Gen Z for streaming movies or series (Feierabend et al., 2018, p. 47). A study by Thinkbox found out, that for 29% of 16-24 years old content viewing is in the “distract” need state, followed by 21% for “unwind” and 14% for “comfort”. The “distract” need state can be explained by a new consumption habit called binge-watching which is defined as watching multiple episodes in a single sitting as one seamless story (Thinkbox, 2018). According to a study by Hulu, 60% of Gen Z engage in binge-watching.

2.2.5 Key Success Factors in Media

Key success factor research in media is a broad and fragmented field. Some researchers focused on investigating one specific type of media or content, for example magazines or specific TV formats, while others have compared different types of media, for example books and movies (Verhoeven & Oana, 2017, p. 4). But with regard to a converging media landscape, Summer & Von Rimscha (2013) stress that results in media research need to be consolidated in order to provide universal and valid KSF for different and transforming media offers (Sommer & Von Rimscha, 2013, p. 11). Therefore, Summer & Von Rimscha (2013) retrieved success factors from a comprehensive literature review and defined the concept of building blocks of successful media product brands, in which they suggests ten factors influencing media success. These factors can be divided into product-related building blocks and process-related building blocks (Sommer, M. Björn Von Rimscha, Verhoeven, Krebs, & Siegert, 2016, p. 2). The major difference between the two building blocks is, that process factors tend to be remote to the actual media product brand, whereas proximate factors relate directly to the product brand (Verhoeven & Oana, 2017, p. 4). Figure 3 presents an overview of the building blocks of successful media products.

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Figure 3 :Building blocks of successful media products (own illustration based on Sommer et al., 2016, p. 2)

Verhoeven & Oana (2017) outline, that content and form are considered to be ‘upstream’ (earlier) in the value chain of a media product, whereas marketing and distribution are ‘downstream’ (later) (Verhoeven & Oana, 2017, p. 5). The present study focuses on product-related success factors as they directly influence the media usage of Gen Z. Process-related success factors will not be considered in order to limit the scope of this study. The following part will have a closer look on product-related success factors and how they relate to the preferences of Gen Z.

Content

According to Sommer et al. (2016) content is the most important building block of media success. The genre is a crucial part of it. The presence of celebrities/stars is also portrayed as having high impact on a media brands success. In order to reach a wide audience, diversity and variety was assessed as another key factor. Exclusivity is particularly important as media brands have to offer content that cannot be found elsewhere to be successful. High levels of credibility and authenticity related to characters and stories are important for entertainment media as well. Additional factors included in this building block are clarity of genre/format, the match of the content to the organization, and the content attributes of quality and novelty (Sommer et al., 2016, p. 4).

Sitcom and Comedy-Formats lead the list of popular TV-genres named by 12 to 19 years old with respectively 20% (Feierabend et al., 2018, p. 46). In a study of Bergmann (1998) on the success factors of content program design for young adults, he suggests that authenticity, communicability and identification potential are the most relevant indicators for designing a successful programming to reach young adults (Bergmann, 1998, p. 78).

Form/Design

Quality and consistency of the contents’ presentation are considered to be key factors. Summer et al. (2016) outline the importance of fulfilling certain design and user experience standards, which is particularly important for adapting the content to different media channels such as the design for mobile usage (Sommer et al., 2016, p. 4). Technological fundamentals such as fast and easy to use products/services are important to Gen Z. If the user experience lags, is unresponsive or prone to errors they become impatient and frustrated quickly. In fact, 62% said they will discontinue using apps which are hard to navigate (Cheung et al., 2017, p. 6). Gen Z members can quickly become bored and distracted when using media. With an attention span of eight seconds, it can be assumed that Gen Z members prefer visually illustrated concepts instead of reading long text passages (Vision Critical, 2016, p. 15). They expect instant gratification. Thus, an easily scannable and fast-loading website is a must (Joyce & Nielsen, 2019, p. 4). Another important feature is the functionality and high quality of a product or service (Vision Critical, 2016, p. 36).

Marketing

The implementation of marketing as a success factor involves the following requirements: profound marketing research on the targeted audience, a fit between the media brand and advertising, the availibility of advertising resources, and the pricing design of the product (Verhoeven & Oana, 2017, p. 6) . There are specific ways on how brands relate to Gen Z in marketing and advertising. Social media and mobile channels will be a priority for marketers. It involves optimizing websites for mobile phones and engaging customers through social media campaigns. Gen Z members want to be connected with interactive and audio-visualized content. Humor can make advertisements more enjoyable and memorable (Puiu, 2016, p. 76). Other powerful advertising methods are innovative online formats, such as mobile-rewards video and sponsored filters. Moreover Southgate (2017) suggests, that media brands should incorporate interactivity where possible and place importance on music and design in order to attract a younger audience (Southgate, 2017, p. 232). Influencer Marketing is another important marketing tool to reach Gen Z. Teenagers are more likely to be influenced by the recommendations of social influencers compared to other age groups (Heintze, 2017, p. 2). It is also important to note, that positive word of mouth (WOM) affects the adoption behavior of potential VOD subscribers (Nam, Manchanda, & Chintagunta, 2010, p. 699). Thus, satisfying and retaining customers through customer relationship management is another key activity in marketing.

Distribution

The success of a media product brand is also influenced by whom, how, and where the content is distributed. The factors integrated in the distribution dimension are “the timing and platforms of audience release as well as the optimization for target audiences” (Verhoeven & Oana, 2017, p. 6) . As mentioned in chapter 2.2.4, Gen Z members use a variety of media platforms and devices. Thus, it is crucial to optimize content access through multiple media channels including mobile phones, TV, laptop, computer, gaming consoles and streaming devices such as Apple TV and Fire TV. Media brands have to keep in mind that Gen Z use multiple screens before, during and after the actual experience with a specific medium. Additionally, it can be helpful to understand the function of different media platforms in order to satisfy a wide range of media usage needs within the audience of Gen Z. For instance, YouTube has emerged as a means of search and discovery besides their entertainment function. Instagram has emerged as a platform for inspiration but increasingly has become a place of interaction with influencers (Brügner, 2015, p. 21).

2.3 Subscription Models in the Media Industry

The next chapter gives an overview of the subscription-based industry. The main characteristic of subscription models is that the consumer purchase is repeated automatically, which enables them to pre-book a service/product or to access and experience a platform. Subscription-based models produce the customer value propositions of convenience and curation (Randall, Lewis, & Davis, 2016, p. 3). One of the main benefits for businesses is that the customer lifetime value is rather high and customer acquisition costs only have to be paid once (Suhr Hansen, 2014, p. 14). The willingness to pay is the primary revenue driver for subscription models, which is derived from a customer value provided by the service (Enders et al., 2008). Subscription services mostly use tiered pricing models in order to target specific customer segments more effectively. Several studies have investigated, the factors influencing the decision to pay for subscription-based online content. The following variables were found to be significant: convenience, differentiation, desire fulfillment, essentiality, usage frequency, added value, perceived quality, perceived fairness, perceived ease of use, perceived behavioral control (Wang, Zhang, Ye, & Nguyen, 2005; Kwong & Park, 2008; Horng, 2012). With the increasing popularity of subscription models, numerous media companies have launched their own subscription-based on demand service. In the ebook industry, Blinkist has emerged as a major player in providing an ebook-on-demand service. For audiobooks, Audible, a subsidiarity of Amazon is offering audiobook-on-demand services. The biggest players in the subscription industry are Spotify in the music-on-demand industry and Netflix in the VOD industry. VOD services can be classified based on the model of monetisation. The major business models in the pay on demand market are subscription video on demand (SVOD), transaction video on demand (TVOD) and electronic sell through (EST) (Martens & Herfert, 2013, p. 103). The following thesis will focus on SVOD.

2.3.1 Subscription Video On Demand (SVOD)

The concept of SVOD gives users unlimited access to a content library for a monthly or yearly subscription fee. Movies and TV series can be streamed on various devices such as television, laptops, tablets, smartphones or gaming consoles (Daniels, 2019, p. 22). SVOD can be described as a service that enables consumers to access, at any time and on different platforms, a large variety of audiovisual content. According to Goldmedia (2018), the total revenue in the German pay on demand market was 1,1 Mrd. Euro in 2017. Figure 4 shows that SVOD had the highest revenue share of 74% compared to TVOD with respectively 12% and EST with 14% (Goldmedia, 2018).

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Figure 4 :Revenue share of pay-VOD segments based on 1,1 Bn. € in 2017 (own illustration based on Goldmedia, 2018)

Among the SVOD services available, the most popular ones are Netflix and Prime Video. Globally, Netflix has established itself as the leading SVOD service and reached almost 100 million subscribers by the first quarter of 2017 and 125 million by the end of March 2018 (Statista, 2017). However in Germany, Prime Video dominates as a market leader with a share of 38,7%, which is illustrated in Figure 5. Netflix is the second strongest power in the German market with 34,1% of the market share according to a study by Goldmedia (Goldmedia, 2016).

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Figure 5 :SVOD market share in Germany, in Q3 2017

(own illustration based on Goldmedia, 2017)

2.3.2. Best Practices

A best practice analysis is a benchmarking method to examine the experiences of successful organizations or competitors. Ideally, the company learns from their experiences and then improves their processes. The following chapter systemizes the success of the biggest player in the SVOD market.

Netflix

Netflix was founded in 1997 and started as an online movie rental service (Netflix Media Center, 2019). In a shareholder letter of Q4 2018, Netflix stated that they had more than 139 Mio. paid subscriptions worldwide, including 58 Mio. from the U.S. and 81 Mio. from international (Netflix, 2019). The great success of Netflix is remarkably related to the quality and quantity of the content they offer. The launch of the series House of Cards, which received nine Emmy nominations, was the starting point of Netflix’s successful Original content strategy. The meaning of Original content is that it is exclusive to the platform and is seen nowhere else. Netflix was the first to focus on producing their own high quality Original programming, which is unique when compared to any other service (Prince & Greenstein, 2018, p. 2). In 2018, Netflix received a total of 112 Emmy nominations for their Original content thereby breaking the record of HBO (Adalian, 2018). Jenner (2016) argues, that a technology driven service strategy has helped Netflix to connect to customers and increase customer satisfaction (Jenner, 2016, p. 26). Netflix uses big data and analytics to discover customer needs and preferences in order to offer a personalized recommendation service and innovative user experience features (Huang & Rust, 2017, p. 910). For all customers who would like to share the subscription price, Netflix offers the possibility to set up multiple accounts for different users (Martin, 2019). By investing in brand-building marketing strategies with focus on raising customer value association and perception, Netflix has successfully positioned itself as the third most loved brand within the 18-19 years old cohort in the U.S. (Morning Consult, 2018, p. 8). In 2018, Netflix has changed its marketing strategy by focusing in the promotion of tentpole brands (strategic important Original series or movies). Moreover, social media has been an important and effective way to drive buzz and customer engagement for specific shows. The main elements of Netflix’s social media strategy are memes, fun and a humorous tone which drive pop-culture conversation and interactive dialogues with their audience members (Keil, 2018). In order to attract new customers, Netflix provides a free trial period as a promotional offer. In Germany, Netflix offers three different subscription. The plan starts from the option “Basis” for 7,99€/month, “Standard” for 11,99€/month and “Premium” for 15,99€/month (Netflix, n.d.). HD-Quality is available in the Standard level. The premium package offers Ultra-HD-Quality. In addition, a higher-priced subscription enables the parallel usage on two or four devices. Due to the variety of plans, Netflix covered a very wide customer base with different watching preferences and purchasing power. Except for mainland China, Syria, North Korea, Iran and Crimea, Netflix is available almost all over the world. Netflix global expansion strategy, has become successful by following a glocalized approach of regionally produced Originals content and closing local partnerships (Brennan, 2018, p. 3).

Amazon Prime Video

Prime Video is part of the Amazon Prime Membership. For 69€ a year, Prime members receive access to free movies and TV shows, music streaming, unlimited photo cloud storage, free and faster delivery, one free eBook per month and special promotions (Amazon, n.d.). What is special on Prime Video is that it offers three different streaming options. The first one is based on the SVOD model, where users have access to a large selection of digital movies and TV shows including Prime Originals. The second streaming option offers TVOD to customers. Customers can pre-order, rent, buy, and stream movies and TV shows at great prices on top of their membership or without (Amazon, 2018, p. 1). The last streaming options is a channel subscription from third-party networks called Amazon Channels. It enables Prime subscribers to add other SVOD services to their Prime billing account as a sort of self-serve SVOD bundle. One of the benefits of this arrangement is that Amazon gets a share of the subscription price (Baumgartner, 2018, p. 34). Prime Video has also heavily invested in developing their Original programming strategy with Amazon Studios to produce Prime Originals. In 2018, Prime Video announced the launch of a Lord Of The Rings TV franchise, driving significant press coverage and social conversation. The licensing rights were 250 Mio US$ (Bishop, 2017). Although Prime Video has not produced as many award-grabbing Originals as its competitor Netflix, their main key success factor clearly lies in the large selection of videos and TV shows. Netflix offers 3,839 movies, while Prime Video offers 17,461 (Siegal, 2019). One of the advantages of Prime Video is the possibility of cross-selling. Once Prime members watch SVOD content, the company has a chance to sell them TVOD content. This means that Prime members can buy videos that are not available yet for instance the second season or movies which just came out of the box office. It can be argued, that synergy effects between the individual benefits of the Prime Membership program are the main drivers for subscriber’s growth. The following graphic shows, that shipping benefits is the most compelling reason for using the Amazon Prime membership (81%). Prime Members also highly value the access to entertainment offers such as movies, series and music (66%).

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Figure 6 :Main motives for Amazon Prime Membership

(own illustration based on PWC, 2018, p. 21)

Internal company documents reveal that Prime Video is used as a leverage to add value to the overall Amazon business model. The strategy is to create buzz with Prime Video shows in order to attract customers to subscribe to the general Amazon Prime membership. In turn, these customers will become Amazon shoppers, which leads to increased sales on physical products (Dastin, 2018). Regarding the user experience of Prime Video, the streaming service does not offer a sophisticated personalized recommendation system and the possibility to set up different user accounts compared to competitors such as Netflix. Instead Prime Video offers the features X-Ray, which gives access to background information on actors, directors and music in a scene while watching the series or movie (Martin, 2019). Another technological add-on is the streaming device Fire TV for 39,99€. It involves an in-voice recognition system to connect to the Prime Video platform and other streaming apps (Uenlue, 2018). The marketing strategy of Prime Video, focuses on increasing the benefit association by communicating the most compelling benefits of the Prime Membership Program (shipping and video streaming) to reinforce the overall value perception of Prime. Another advantage of Prime Video is the possibility to launch scalable cross-channel promotions on seasonal events in the Amazon ecosystem including Popcorn Week, Digital Week, Black Friday, Cyber Monday. A successful example is Prime Day – a shopping event, where Prime members get exclusive deals and discounts on the platform (Amazon, n.d.).

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