Roku's 2025 Predictions - A Q&A With Tedd Cittadine
Roku has just released its 2025 predictions report. Tedd Cittadine, SVP of Streaming Services Partnerships at Roku, talked with Streaming Media’s Tyler Nesler about their key findings, including the impact of price increases on audience retention, the effectiveness of advertising-supported tiers, the importance of bundling strategies to meet consumer demand for flexibility, and the growing significance of sports programming in driving subscriptions.
This interview has been edited for length and clarity.
Tedd Cittadine
Tyler Nesler: What kind of impact have price increases had on audience retention, and what kind of uncertainties are there for the market going forward into 2025?
Tedd Cittadine: Starting in 2022, we saw some significant price increases across the industry. I think our content partners have found that they are starting to reach the upward bounds of price limitations for consumers. From our research, they are reaching the point where the churn caused by them outweighs increases. It will be much harder in 2025 to convince consumers that every year or so, they can get the same price increases and elevations they've had in the past. The math is not going to work anymore. There is some third-party research on this from Antenna, and in the last 30 months, we have seen a 40% increase in churn across these services. And so, it will be much more difficult to convince the consumer that price increases will make sense at least on a standalone basis.
TN: How can providers experiment more aggressively with new pricing tiers, incentives, and bundling strategies? What are some innovations you're seeing in that space?
TC: Starting a year and a half ago, we saw the divergence of advertising-supported tiers as a way to offer the consumer a lower introductory price point. That certainly resonates with our users, and that was the way that our content partners could offer lower introduction price points but have the advertising components make up for average revenue per user (ARPU). That was a great win for our partners, and that's why we saw Netflix, Disney, and Amazon enter these ad tiers, which generally remain lower price points that are good for the consumer but are packed full of advertisements.
We can argue if that's good or bad, but now the price increase for ad-free tiers continues to escalate. Netflix is a good example, where they kept their ad advertising price low, around that $7 price point, but then they eliminated mid-tiers. According to Antenna, about 45% of consumers are completely ad-intolerant. And so they will continue to pay higher and higher prices for ad tiers up to the limit, but it has been shown that historically, the other 55% are more than happy to enter ad-supported services. And so the advertising subsidized price point has been an industry innovation. Early on, Roku thought that advertising and streaming would go hand-in-hand. We introduced our Roku Channel eight years ago. That has been tremendously successful.
A second innovation we see is bundling, where combining multiple services will help consumers lower the effective price point. Bundles have shown lower churn, giving consumers more utility and value. [But] at some point, we have to make sure that consumers actually want these bundles, and we're not just creating things that people don't want at a higher price point. The bundles that we're offering now are good for consumer value, and those are getting a lot of uptake. Roku was the first platform to introduce the Disney bundle for acquisition on Roku for our billing systems. And so we're a big proponent of offering consumers utility directly in our own subscription business or with our partners and offering bundles at reasonable price points.
TN: The sports space has dramatically increased over the past year, especially with the opportunities for fan engagement. What are any remaining barriers for rights holders to adopt a more streaming-first ethos? It seems like not that long ago, there were complicated rights issues. It feels like that's lessening now, but are you seeing that?
TC: It's a really good question. I think we're seeing companies be much more aggressive in sports on streaming today, and that's resulted from a lot of growth in subscriptions over the last two years. Peacock and Paramount+ are among our best performers. For example, it’s not a coincidence that NFL content has driven a significant amount of that growth. Peacock also has a great Olympics offering, and we did a very large Olympics home screen integration with them that was tremendously successful.
Sports are very expensive from a rights-holder standpoint, but I think they are learning that this is driving significant increases in streaming subscriptions. They are not reserving this content for traditional TV; they are making it available now aggressively in streaming. And so Roku is welcoming that with open arms. We're very optimistic about rights holders now leaning into streaming for content.
I think the way Roku can add value is by being a platform that helps people discover all this sports content because you will have a bunch of different sports providing services, and it will be very complex for users to try and find it all. Our Sports Zone destination is based on the [search utility] from a consumer standpoint, and that is where we really think we can add value.
TN: Any thoughts about the cost advantages of sports programming versus scripted television? Even with the recent rights issues, do you think that is offset by streamers having to produce less original content or having to lean as heavily into creating original programming? With matches, critical reviews aren't relevant in the way they are with scripted programming. People are going to watch their favorite team no matter what.
TC: For sure. It's a great counterbalance to original scripted programming. Even Netflix typically has kind of resisted sports but is now going into these big events, like the [Paul/Tyson] fight. And I think for them it really makes sense. There is not anything really in streaming other than sports that can congregate a [large and live] audience like that. It's also a great way to sign up a bunch of users and it's a great way to offer advertisements to a large audience. That's why I think sports will become an even more important part of content programmers' arsenal going forward. I'm very optimistic about where this is going, and I think we'll see much more from partners like Netflix and others to create a breakthrough zeitgeist with these big events that only sports can do.
TN: Is there anything else you can add that you anticipate for 2025 that could be especially innovative?
TC: Making subscriptions more accessible for everyone will be essential. I think today it is sometimes challenging to manage your subscriptions, and Roku would love to be able to provide better utility in how you subscribe. So, if you want to subscribe for three months or one series, we'd love to have that concept. Or, if you'd like to make your own bundle or have much more flexible bundling, we'd love to have that concept. Even making your subscriptions more transparent. Sometimes, people lose track of their subscriptions.
It would just make it easier to do all of these things and to make it transparent, more functional, easier to turn it on or off or pause, and then aggregate subscriptions in one place. I think people are looking for good value and bundling in easier ways. That's the next innovation that streamers like us can do: make it easier for folks to manage all of this.
Infographics courtesy of Roku.
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