Frontier works across a range of customer markets, including streaming, gambling and how we pay for our goods and services. Each of these industries has had some significant moments in 2023.

Streaming services are increasingly leaning on advertising models to balance their customer share with revenue. Elsewhere, the gambling industry is facing a reckoning with regulation to protect their customers. And even how we pay for these services and our day-to-day goods is taking on new digital forms.

As we wait to see how these each of these industries continues to evolve in 2024, we look at the revolutionary moments from the last 12 months and discuss what we can learn about their direction for the year ahead.

#1 To stream ad-free or not ad-free?

Twelve years ago Netflix launched its streaming service in the UK, subsequently rolling it out across Europe. In the years since then the growth of subscription-based video-on-demand (SVOD) services has dramatically changed the way that many people watch TV, offering a sometimes overwhelming choice of big-budget content. While the consumption of paid-for, ad-free video on demand has become a habit for many UK households, the last 12 months has seen the three largest SVOD players all launch new subscription tiers with advertising.

The new offers from Netflix, Disney+ and Amazon Prime Video are similar in nature but their positioning has been slightly different. Netflix currently offers a standard ad-free, HD service priced at £10.99/month, a new “basic with ads” service at £4.99 in SD without downloads and a “premium” service at £17.99 in UHD supporting more simultaneous streams and devices. Disney+ charges £7.99/month for its standard ad-free service, or £4.99 for “standard with ads” but no downloads and £10.99 for the premium UHD service. Amazon Prime Video is typically bundled with the wider Amazon Prime service at £8.99/month, with users set to pay an additional £2.99/month from February to keep watching ad-free. While the psychology of trading up and trading down may be important, it will perhaps be a secondary consideration. More significant will be the extent to which UK viewers have come to expect subscription viewing to be ad-free.

Further, the commercial success of these offers and the shape of the future UK TV landscape will depend on two related reactions.

• The number and the profile of viewers who accept the trade-off of cheaper streaming with ads.
• The willingness of advertisers to spend on building audiences across a broader number of shows and timeslots than they may be used to with with traditional broadcast viewing.

This creates a set of trade-offs between the willingness of some viewers to watch ads in exchange for cheaper subscriptions, the value of that group of viewers to advertisers, and the amount of ads that those viewers will see in a given time period. Valuing and optimising those trade-offs is not straightforward. Moreover, the success of streaming services has shown how quickly habits can be changed with the right proposition. Further experimentation with the pricing of services and placing of advertising seems inevitable.  And while the success and evolution of the global streaming businesses continues, the impact on the national consciousness of a show like ITV’s Mr Bates vs The Post Office has demonstrated that, despite the significant and growing investments made by the SVOD players in their local markets, domestic Public Sector Broadcasters can still play a powerful role in broadcasting.

#2 A behaviour-driven approach to gambling regulation?

It looks as though 2024 is shaping up to be another year of debate on how to protect customers from gambling-related harm while ensuring a safe, licensed and commercially viable gambling sector. In mature gambling markets across Europe, it’s not a new debate. Even in the US, with its nascent gambling markets, some policymakers have started seeking further protections for customers.1

So far, policy measures have focused on blocking certain products and propositions. In the UK, for example, regulators have targeted game design specifically via (i) a consultation on proposed stake limits for online slots that ended in October 2023; and (ii) empowering the Gambling Commission to explore game speeds and other features likely to exacerbate risks.

In 2024 we expect to see an even sharper focus on marketing tools – not just the effect of free spins, matched bets and other inducements, but also a closer look at options to further restrict advertising by gambling operators. In this exercise, it is important that regulators grasp the distinction between, on the one hand, advertising that is a “call to action” for customers to do something new or different, and, on the other hand, advertising that is focused more on “brand building” and the goal of luring customers from rivals (before they then try to steal them back). Operators should be able to help regulators understand this difference and identify which of the particular calls to action have greater associations with gambling harm.

The real key to effective gambling regulation is an appreciation of the link between operators’ product and proposition design and the psychological drivers that lead to problem gambling. This is where it becomes very difficult for regulators: why does one customer experience gambling problems while a seemingly identical customer doesn’t? For us, it’s the psychological overlay that is missing from the debate. Taking proper account of the differing psychological profiles of gamblers can help ensure the right interventions are targeted at the right customers, leading to a safer and more successful sector overall.

#3 New ways to pay

After a year in which regulators accelerated efforts to drive innovation in payments, some of these efforts look as though they might come to fruition in 2024.

Last February the Bank of England and HM Treasury launched a consultation on the ‘digital pound’, a means of storing value and making payments directly through the central bank rather than a commercial bank.

The Bank of England sees the digital pound as meeting two objectives. First, as a way to protect monetary uniformity and stability as cash declines. Second, as a way to enable new forms of competition and innovation in payment services. With the Bank holding money and processing payments on its own ledger, payment providers will no longer need to hold money themselves. The Bank hopes this will open up innovative business models and spur new forms of competition between providers and with other payment options.

The Bank received over 50,000 responses to its consultation, highlighting the strength of feeling on the subject, and has since moved into a ‘design phase’ for the digital pound. We expect more details to be unveiled in 2024 as the Bank sets out its next steps.

The new year has also kicked off with a consultation from the Payments Systems Regulator (PSR) on establishing a commercial model for variable recurring payments (VRP) for low-risk payments such as utility bills. VRP will be an extension of Open Banking capabilities, and the PSR’s ambition is that it could eventually be an alternative to everything from direct debit to card payments. Getting the commercial model right is critical to ensure a thriving ecosystem of innovation and investment around VRP, and there is much to debate on that front. Once the commercial model is established the industry will have it work cut out to meet the PSR’s proposed launch date in late 2024.