For over four decades after the Second World War, TV sets had to be connected to antennas to receive broadcast TV programming (i.e., by air) from national media networks. In the two last decades of the 20th century, connections have shifted to networks of cable and satellite TV companies (the shift started earlier in the US; some households connected to private satellite dishes). Now, in the early decades of the 21st century, TV connections move again, this time to broadband Internet to receive TV video content by streaming, including TV programmes and films. Moreover, video content can be streamed for viewing on Smart TVs, computer screens (desktop/portable), and on screens of mobile devices (smartphones and tablets), via wired or wireless connections (though wired is still advantageous for TV content). What counts for “TV” is more fluid and it is no longer bound to TV sets in the classic form.
The streaming market for TV content is entering lately a new stage of transition. The competition is getting tougher and more crowded as ‘old-new’ players (i.e., established media networks) are entering or stepping up their involvement in streaming of full-programme video content. Netflix has set an example, and a challenge, to the more ‘traditional’ TV companies since 2007, when Reed Hatsings identified the potential of broadband Internet for streaming film content and faded-out Netflix’s model of mailing DVDs to customers. Over the past decade Netflix kept an advantage, though the gap from competitors (e.g., Hulu, HBO-Now, Amazon Prime Video) has been narrowing down. The latest developments, as discussed below, pose a more serious threat already to the business model and status of Netflix, expected to make it much more difficult for Netflix to stay on top. But the overall growing streaming activity by technology and media companies should worry nonetheless the cable and satellite TV companies of the previous generation from the 20th century.
Netflix offers to its subscribers a variety of films (movies) and TV shows, but its prestige relies particularly on its original in-house productions. Its TV series may be found in multiple genres: TV dramas (e.g., Riverdale, The Crown), Comedies, TV Sci-Fi, Crime TV Shows, Anime Series, TV Horror, Documentaries, and Kids & Teen TV. Some series are known also outside the circles of its customers; among its popular series Netflix lists, for instance, Stranger Things.
However, Netflix gives its subscribers access to view many TV programmes from other companies, including highly popular series from the American national networks, and henceforth difficulties are starting to pile up. As media companies like NBCUniversal and Disney (which are tied together) are about to launch new streaming services, they become more protective of their in-house content productions and intend to block competing streaming services from offering their programmes and films. The Walt Disney Company is additionally now in full control of Hulu streaming service (through its acquisition of 21st Century Fox in March 2019). Furthermore, HBO which currently operates the streaming service HBO Now is in ownership of WarnerMedia (AT&T), under its Entertainment division; HBO is preparing to launch HBO Max in 2020, a new on-demand TV service by streaming.
A battle over rights, especially exclusive rights, to screen video content of films and TV programmes between companies of different orientations is unfolding, and this situation signals trouble for a company like Netflix. For example, Netflix had to pay a gargantuan sum of $100 million to continue to screen Friends on Netflix during 2019, but next year the series will move to HBO’s streaming platform as it launches HBO Max. Friends, the sitcom series from the 1990s, has been very popular among Netflix’s customers, since it started showing in 2015, thus putting pressure on the company to keep it, for as long as they could. In attempt to compensate, Netflix committed to pay a considerable sum of half a billion dollars to secure rights to screen Seinfeld (its ‘spin-off’ comic series Curb Your Enthusiasm by Larry David, that is considered more favourable outside the US, will remain an exclusive of HBO Max). Also, the American version of the originally British satirical series The Office that is still available in Netflix’s library will be reserved from 2020 to the new NBC’s streaming service, NBC Peacock. Such difficulties may force Netflix to rely even more on new and original materials, but investors are debating if those materials, being expensive to obtain, can provide sufficient return to be profitable (“Netflix Feels the Pressure as Competitors Circle“. BBC News, 17 October 2019).
The streaming service Hulu provides primarily original content of NBC and Fox. Its library includes categories of Hulu Originals, Movies, Current and Past Seasons of TV Series, and Kids. Yet Hulu has an additional facet: it avails a service of real-time TV programming. Hulu offers a basic plan, Hulu (for $5 per month), that allows streaming content from its library (with ads) and an enhanced plan, Hulu + Live TV (for $45 per month), that includes 60 TV channels (American), VOD channels and DVR for recording. As noted above NBC and Fox are actually owned by Disney, which in turn is set to launch in November 2019 a streaming service called Disney+. The Disney Plus service will specialise in films and programmes from Disney’s own studios, plus Marvel, Pixar, Star Wars (Lucasfilms), and National Geographic, and a large selection of Disney classics as well. Yet from a different corner, NBC is going to launch NBC Peacock in April 2020 that on its part will offer TV shows and series of NBC network, films from Universal Pictures and DreamWorks studios, and it promises to provide for viewing more cinema films from Hollywood bigger studios (NBC Press Release, 17 Sept. 2019). It is said to be supported by both advertising and subscription (not clear at the moment if it will be available outside the US/North America). It will be interesting to see how the Walt Disney Company allocates and manages content for viewing across the three streaming services in its control: Disney+, Hulu, and NBC Peacock. It is not unimaginable that one of them will become redundant due to overlap and internal competition.
More concerning is the intention of Disney to preserve for its own streaming services the rights to screen video content, past and present, from the various studios it controls. The company is expected to forgo $2.5 billion in revenue by removing Disney content from rival services [Adam Lashinsky in Fortune Magazine, May 2019 *]. Additional revenue is likely to be lost by taking off also content of NBC and Fox from the libraries of rival services, such as Netflix. Lashinsky raises alarm over this plan of the Disney company because of the financial harm foreseen to be endured; the big question is: will it pay off in the long run by attracting enough viewers-customers keen on watching Disney video content. Competitors will suffer some headache in filling the gap by bringing content from new productions and alternative sources; will their customers miss the withdrawn content enough to switch or to subscribe to an additional service to get access to the ‘worlds’ of Disney, NBC or Fox?
Amazon Prime Video service is challenging Netflix for a while now, especially in investment in original productions. The Prime Video service offers original Amazon TV productions next to TV series from other TV providers (e.g., HBO, CBS), in addition to categories of Movies and Kids. A title ‘Amazon Original’ is flagged upon image frames of programmes credited to Amazon. Multiple genres are available: Drama, Comedy, Kids & Family, Action & Adventure, Documentary, Animation, International, and more. Members of the Prime Video club can view much of the content for no additional fee. The video content can be watched from the Web and with Amazon Prime Video app on mobile devices, with set-top boxes, and on selected Smart TVs. The competition of Amazon with Netflix would become more intense if the more veteran media companies pull content out from their video libraries.
Apple, a prime technology company, is increasing its involvement in the field of TV media with the combination of its Apple TV app and the upcoming Apple TV+ streaming service (November 2019). Apple also will not be shy in investing in original productions. The Apple TV+ service will bring new original stories of Apple (e.g., The Morning Show starring Jennifer Aniston and Reese Witherspoon; the latter already appears with Nicole Kidman in a successful series “Big Little Lies” of HBO). The original programmes will show on top of programmes and films from different premium channels, streaming services (but not Netflix), and cable providers; all can be watched with the Apple TV app on the company’s mobile devices, computers and smart TVs (CNet.com, 16 October 2019).
- The plans of Netflix range in price from $9 (Basic) to $16 (Premium) per month. The plans of Hulu exhibit two price extremes ($5 — $45), with advertising on the one hand and Live TV on the other. Disney is said to charge $7 per month ($70 for a year paid in advance); it promises the service will deliver at a technical (HD) and content quality of the Premium plan of Netflix. The expected starting fee for Apple TV+ is $5 per month. Subscription to Amazon Prime Video seems to require a membership fee of $9 and then $13 per month paid monthly or $119 for a year paid in advance.
Cable and satellite TV companies face a difficult competition from TV streaming services that give viewers great flexibility with often high quality programming content. The streaming option gives a new leverage to the established TV networks and media companies to attract viewers for starting customer relationships directly with them. But the cable and satellite TV providers can still hold an important advantage: bringing a widespan variety of content of different styles and flavours from different sources, not committing to a single external production house, in addition to their own productions. Furthermore, many TV viewers are still likely to want to watch real-time (‘linear’) TV programmes (e.g., news). The TV channels should include channels of the viewer’s own country as well as optional channels from other countries and in other languages. National TV networks already provide an option to view their programmes by streaming on the Internet: live as they show in TV schedule and recorded (e.g., BBC iPlayer allows UK residents to watch programmes of BBC1 to BBC4 channels on demand); some programmes may be viewed for free and some by paid subscription. Newspapers are also producing more video stories for streaming.
However, cable and satellite TV providers should re-consider their models of service and allow much more flexibility of choice of channels by building greater modularity into their TV service plans. Video-on-Demand (VOD) and recording (DVR) services are desirable and appreciated but they are not enough. There is little point left these days in offering ‘basic’ plans with 100+ channels for a high monthly fee when people regularly watch only a small fraction of them. In the age of customization, TV viewers-customers should be given more freedom in building their own bundles of TV channels. More of the company’s income can come from the fees on ‘packets’ or sub-bundles of channels customers add-on to a low-cost basic plan, yet customers will then know they are paying for channels they are truly interested watching (e.g., news and documentaries, classic cinema films 1940s-1980s, British / French / Italian TV, vintage TV series 1960s-1980s, animation, and so on). The sub-bundles should be small and focused.
Building fences around original TV content of one company and barring streaming services of other companies from offering those programmes will not benefit anyone, neither on the provider side nor on the customer-viewer side. A TV service provider can differentiate itself by protecting the exclusivity of a greater part of its original video content (as ‘anchors’) while allowing a flavour of it to be experienced by customers of its competitors. It is no less logical doing so than licensing rights to other broadcast TV networks, cable and satellite TV providers to screen their programmes. Content has to be shared between the TV service providers, for the appropriate credit and fee.
Television viewers are looking more afar and broadly across the TV spectrum to find the kinds of programmes they wish to see in the few hours they have spare to watch TV. But there is probably a limit to the number of different streaming sources they will be ready to subscribe to in order to access a satisfying variety of programmes and films for viewing. Adding streaming services will not help if they become too secluded. That is why cable and satellite TV providers can still have an advantage, yet they need to give more flexibility of choice to their customers. To gain the awareness and interest of TV viewers in the series and films produced by media and TV companies, they have to share their works instead of raising fences between them.
Ron Ventura, Ph.D. (Marketing)
[*] “Disney’s Latest Blockbuster Isn’t in Theaters”, Adam Lashinsky, Fortune Magazine, 1 May 2019, 179 (5), pp. 5-6.