TV: Choices or Lower Prices. Not Both
Why would I have gotten Peacock if we have Paramount , my partner, Liz, asked Friday as we searched for the trials for the USA women’s gymnastics team. Because Paramount is CBS and Peacock is NBC, I told her.
I only know this from writing about the merry-go-round that is the streaming TV market in June 2021. Those services weren’t on consumers’ TV grids at the start of 2020, but they’re part of the latest direct-to-consumer (D2C) trend where media companies offer subscriptions to consumers over a broadband connection, rather than via a cable, telco or satellite pay-TV service. Hold on because the wheel is sure to spin again in July in an industry that seems to change by the month.
We asked for it, I say, when I think of all the years we consumers complained about the monopoly local cable companies had and the prices they charged. We wanted more choice and lower prices, and now, in the era of ongoing cord-cutting, we got half of what we wanted: We have more choices than ever. We can choose from a couple of hundred over-the-top (OTT) streaming services. Overall, it’s a good thing, but changes are happening at a dizzying pace.
We also have a lot more choices for how we’ll watch those streaming services from digital media players (Roku, Amazon Fire TV, Chromecast, Apple TV and TiVo Stream 4K), smart TVs and other connected devices. As of May, 82% of U.S. TV households had at least one internet-connected TV device — a connected smart TV, digital media player, connected video game systems, or connected Blu-ray players. That’s up from 30% in 2011, said Leichtman Research Group, and many have cable and OTT services.
So now we have choice and the ability to set our own price limits. What’s the problem? Entropy and overlap. You might have a bundled video service via another plan (Verizon Wireless or T-Mobile for instance), you have to keep track of passwords and subscriptions for individual plans; and you have to remember what you watch where. “Consumers are feeling the pain of chaos (too many streaming services) and fatigue as content is unpredictably fragmented across numerous, access-restricted streams,” said Horowitz Research.
In the past two years alone, said Horowitz, the industry has seen the launch of Disney , Apple TV , BET , HBO Max, Peacock, and discovery ; the rebranding and relaunching of CBS All Access into Paramount ; the launch and shuttering of Quibi and TVision; the exit of PlayStation Vue and the entrance of AT&T TV, which is the latest iteration of DirecTV NOW and AT&T TV NOW. “Consumer perceptions of chaos and their continued retention of (and perhaps nostalgia for) managed MVPD [multichannel video programming distributor] services is at this juncture not surprising.”
Amid all the talk of cord-cutting, cable still has 43 million subscribers, many of whom also have a Fire TV or Roku stick for OTT services, but cable companies also lost 1.9 million subscribers in Q1, the most ever, said Leichtman. It’s not just traditional pay-TV services that are facing subscriber losses. Virtual MVPD services such as Hulu Live TV, Sling TV, and YouTube TV — which launched as OTT alternatives to cable over the past few years — are seeing subscribers leave ship, too.
Top vMVPDs lost about 257,000 subscribers in Q1, including Hulu Live TV (minus 200,000) and Dish’s Sling TV (minus 100,000). Figures from YouTube TV weren’t included because Google doesn’t make those figures available on a regular basis. Sports-focused fuboTV was the only vMVPD to add subscribers in the quarter, about 42,500, bringing its relatively modest subscriber count to over half a million.
To remain competitive, vMVPDs have tried adding expensive content offerings and then passing price hikes on to customers. YouTube TV, for instance, is now $65 per month, having launched at $35 per month in 2017. The fee ticked up to $40 per month a year later after YouTube TV added Turner networks, then by another $10 in 2019 when it brought in Discovery channels, and then it slammed subscribers with a $15 assessment last summer after tacking on ViacomCBS channels.
“We don’t take these decisions lightly, and realize how hard this is for our members,” blogged YouTube TV at the time. “That said, this new price reflects the rising cost of content and we also believe it reflects the complete value of YouTube TV,” it said, doing its best cable company imitation. YouTube TV touted its 85-plus channels, unlimited DVR storage, access to three concurrent streams, no need for a cable box (or associated fees) and no contract.
The last selling point — no contract — is proving to be a two-sided sword for vMVPDs and for OTT services, too. They give consumers easy entry and exit. At the June StreamTV Show, MoffettNathanson analyst Michael Nathanson noted D2C platforms have seen average monthly customer churn rates of up to 10% compared with 2%-3% rates for pay-TV subscribers. It’s hard to raise pricing in the streaming market because of the churn threat, said Nathanson.
The month-to-month model of a vMVPD service is highly appealing to customers like me who don’t want to be stuck in a one- or two-year cable contract. The challenge for vMVPDs is making their service attractive enough to keep subscribers long term. YouTube TV and fuboTV, have faced subscriber losses after a particular sports season ended, and streaming services face similar challenges when bingers finish a series.
Industry pundits debated HBO’s subscriber losses after Game of Thrones ended. To make its pricey $14.99 monthly streaming service more attractive, HBO launched HBO Max, putting its entire library up for streaming and then instituted a same-day release policy for movies in theaters and on the premium streaming service. Disney , by contrast, is $7.99 a month.
Traditional pay-TV (cable, telcos and satellite providers) still had 71 million subscribers as of March, led by cable’s 43 million, said Leichtman. That compares with over 95 million in Q2 2014. The writing appears to be on the wall with even pay-TV providers now offering customers vMVPD options. Fios offers YouTube TV as an alternative to its fiber service; Comcast has its own Xfinity Flex OTT service. Maybe everybody wants to ditch the cable box.
Advertisers are making the shift, too. “We are not just interested in which network is going to deliver the highest adult 18-49 ratings anymore,” David Campanelli, chief investment officer at media-buying agency Horizon Media, told Variety in March.” We are looking for where our targets for our advertisers are consuming content and what is the most effective and efficient way to reach them.”
Roku, which recently launched its own ad-supported channel, is pitching hard for those ad dollars using analytics from its platform. Chief financial officer Steve Louden said at a recent investor conference that Roku’s data and recommendation algorithms can be “very finely tuned” because the company knows who’s watching. Since the pandemic, many advertisers are allocating budget to streaming at a faster rate, correlating with the rise in OTT viewing, Louden said. A third or more TV viewing is now happening on streaming devices, he said.
In our household, we have a big decision coming up when our two-year Fios contract ends at the end of July. We’ll be poring over our options over the next couple of weeks. Do we leave Fios altogether, keep it for broadband only and add a vMVPD service for TV, or chain ourselves to another bundled contract with pay-TV? So many choices….