So, you’ve dumped cable and launched yourself into the world of cord-cutting. But what now? How do you know which services to subscribe to? Is it possible that there are just too many TV streaming services to choose from these days?
You browse through the libraries of Netflix, Amazon Prime Video, and Hulu, and see some of your favorite shows on each — you sign up for all three. But wait, you still want to be able to watch live TV, so you add a subscription to Sling TV or PlayStation Vue as well.
It’s probably best to get a subscription to Britbox or Acorn TV too — your partner loves classic British comedy. And what about the kids? They’ll definitely want a login for the forthcoming Disney streaming service.
Suddenly, you’re back where you started. You’re paying the same amount of money each month as you were for cable, and all you’ve achieved is a more fragmented service.
You’re not alone. This paradox is a growing problem for cordcutters. Let’s take a closer look at the issue.
Music Streaming vs. Video Streaming
Your decision almost certainly wasn’t based on the availability of music. With a few notable exceptions, the same selection of songs is available across all of the apps. Instead, factors such as price, user experience, and integration with your other hardware probably drove your decision-making process.
TV shows and movies, however, are a different ball game. Unlike Spotify, which largely just has to deal with record labels, services like Netflix are navigating a minefield of movie studios, TV networks, and distributors. Not to mention the complex licensing issues, which differ from country-to-country.
The end result of all this complexity is fragmentation.
People Want a Unified Service
In the last few years, two things have become apparent:
First, the old cable TV model is failing (arguably, it’s already failed).
Second, people seem to want just one on-demand video provider — and they want that provider to be Netflix. After all, people only had one cable TV provider, why should streaming by any different?
The claims are borne out by the facts (via Fortune):
- At the end of 2016, 81 percent of American adults between the ages of 18 and 35 had Netflix accounts.
- In June 2017, Netflix had 50.85 million subscribers in the U.S. alone. The “big four” cable companies had 48.61 million.
- In the first fiscal quarter of 2017, the big four cable companies lost more than 100,000 subscribers. Netflix gained 1.4 million subscribers.
- Of all the households that use streaming services, Netflix has a presence in 75 percent of them.
Netflix’s Changing Business Model
With statistics like these, it’s hard to see how the future is anything but rosy for both Netflix and cordcutters. But dig a little deeper, and things get somewhat thornier.
Much of Netflix’s success so far has been built on licensing old content. But licensing content from other rightsholders is expensive; at the end of 2016, the company owed more than $5 billion in TV show licenses alone.
Conscious that its customers are now accustomed to the idea of paying less than $10 per month, and that rightsholders are jacking up the price of licenses to offset their downturn in profits, the company has increasingly turned its focus to producing original content instead.
Many of its original shows have been a massive success: House of Cards, Orange is the New Black, Narcos, Stranger Things, The Crown… the list goes on.
So, what’s the problem?
A Fragmenting Market
Netflix’s status as the dominant streaming service is under threat, and with it, so too is the concept of a unified streaming app.
Prime Video has followed a broadly similar trajectory to Netflix. Amazon started off licensing old shows from other networks but has progressively spent more money on producing its own content.
Like Netflix, Amazon isn’t short of cash. It has plenty of spare capital to pump into production — money that the traditional networks can only dream of spending.
The jewel in its crown is The Grand Tour, but its lesser-known original shows have also earned plenty of critical acclaim. Transparent, The Man in the High Castle, Mozart in the Jungle, and Bosch have all proven to be particularly popular.
Disney and the TV Networks
In August 2017, Disney announced it was cutting ties with Netflix to launch its own streaming service instead.
This move is understandable for two reasons.
First, Disney has a vast back catalog of shows and movies, all of which remain timelessly popular among kids and adults alike. It knows people will sign up, and it knows the service will earn them a lot of money.
Second, if Netflix and the rest are going to keep producing more original content and slashing their licensing agreements, while at the same time people are canceling their cable subscriptions en masse, how else is Disney going to keep its content in people’s minds long-term? Remember, we’re living in an age where DVDs represent “old technology” and piracy is easier than ever.
The Truths of Producing Content
Is this the start of the snowball? How many networks and other content producers are going to start their own streaming services? After all, we’ve already seen the U.K.’s two biggest networks — the BBC and ITV — do something similar in the United States with the launch of Britbox. HBO and Fox have their own apps, and now Disney is launching its own as well.
At this stage, we don’t know. But a look at some truths behind the production of TV content offers some clues.
In 2016, television companies earned $73 billion in ad revenue. Of that $73 billion, the majority wasn’t being earned from new shows running in the early evening. Rather, it was coming from two primary sources: primetime re-runs of favorites like How I Met Your Mother, The Big Bang Theory, and Law and Order, and sports.
The ads themselves are sold by viewer numbers, and ratings are king. If audience numbers fall, the ad companies have to pay more per person. It won’t take a massive drop-off until the ad companies simply walk away, or at least demand much more favorable financial terms.
A decline in ad revenue will have three knock-on effects:
- Networks won’t be able to compete against Netflix and Amazon for new scripts.
- The quality of the network’s new shows will suffer.
- Networks won’t be able to afford to show the premium sports events.
Remember, American networks are already facing an uphill battle to survive. Compared to their British and European counterparts, they already include a lot more ads and product placements, work with fewer sets, provide fewer special effects, and shoot fewer episodes per series.
You can draw your own conclusions, but I think it’s almost inevitable we’ll see more “Disneys” in the coming months and years. Subscription-based online streaming is becoming the only way for the networks to compete.
Is Netflix Becoming Just Another Network?
Let’s look to the future, and what the situation might be like for users.
If Amazon, Netflix, and the rest continue to focus on their own content (and do so successfully), their list of licensed content will dwindle. That’s clear.
Therefore, ask yourself this question: At what point do those services stop being streaming companies and start being “21st century TV networks”?
If they show almost all their own content with a few popular reruns of classics here and there, there’s nothing to distinguish them from any other network.
A La Carte Is the Future
One of people’s biggest gripes with cable TV is the lack of “a la carte” subscriptions. Typically, cable companies offer four or five packages, and you can be sure that the content you’re most interested in (generally sports and movies) is the most expensive package.
Ironically, it seems like those complainers might finally get their wish. The future of video entertainment isn’t cable or all-in-one streaming services. It’s a la carte online subscriptions.
If you like the original shows on Netflix and ABC, and want to watch live sport on Fox, those are services you’ll have to sign up for.
If you want a “full” package that closely represents the choice you had with cable, it will be possible, but it will cost you. Most worrisome for cord cutters, the difference probably won’t be that different to current cable costs, and that’s assuming prices stay roughly as they are today.
How Many TV Streaming Services Is Too Many?
Frankly, it depends on who you want to listen to.
Based on the facts, it seems consumers would argue one, or perhaps two, is fine. After all, while Netflix reaches 75 percent of homes, it’s next nearest challenger — Amazon Video — doesn’t even reach 35 percent. When you consider much of Amazon’s reach is driven by Prime subscriptions, it’s apparent users are happy with the current situation.
After all, given that the number of hours we spend watching TV has been steadily decreasing over recent years, do we even need multiple services? Outside of a few fanatics, how many people are that desperate to watch a certain show that they’d sign up for a $10-per-month plan to watch that and nothing else?
On the other hand, if you listen to networks and rightsholders, they’d probably say choice is king: the more services, the better. Consumers can sign up for the ones they want, and the realities of a capitalist marketplace will take care of the rest.
Ultimately, both sides make good arguments.
Where Do You Stand?
What do you think the future holds for Netflix? Will it continue to be the streaming service of choice even as the market fragments, or will the lack of classic shows combined with more a la carte options bring the struggling networks back into the picture?
Most importantly, how many streaming services do you think is too many? Are we already reaching a tipping point? Or is there room for more niche streaming services to complement the big players? How many streaming services would you sign up for at any one time?
As always, you can leave your thoughts and opinions in the comments below!
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