Streaming video: We hardly knew ye

Sep 9 · 17 min read

The disruption theme is probably overblown. In the end, it’s really just…television.

Rare are the media industry epochs when so much Sturm and Drang converge as has been the case in the summer of 2019 in the streaming video arena, where the mighty powers of the media business have spent much of their time swapping around old TV shows like they were magic beans destined to cause a money tree to sprout from the ground.

If you missed it, a refresh: NBCU took “The Office” away from Netflix, leaving it to simmer on the back burner as NBCU plots its own streaming service, a new entrant that will look and behave, tellingly, much like a traditional cable channel. Similarly, AT&T’s WarnerMedia made plans to yank “Friends,” preserving the iconic 1990s sitcom for the phone company’s own clutches as it wades into the category with a new entry called HBO Max. To cap it off, Disney said it’s going to keep movies from prized portfolios like Disney Studios and Star Wars on Disney’s own video-entertainment service, Disney+, rather than allow them to drift into the Netflix orbit.

Next: Milton Berle returns to reclaim reruns of “Texaco Star Theater” for his own streaming service.

Basically, what’s happening is that some aging TV series and movies are being pulled from here and planted there. It’s the perfect parable for where television is going, which is to the same place it has always been. The thing we call “streaming media,” which is supposed to revolutionize video delivery, is instead reaching back into television’s past. Reruns, baby.

No surprise
This shouldn’t be altogether surprising given that this new breed of streaming services resembles, more than redefines, the traditional model for television.

The kinship is especially apparent where it matters most: in the home. Findings published by Nielsen for the first quarter of 2019 point out that viewing to “streaming” services most commonly happens on the same glowing screen where people watch the chestnut medium of traditional television: on their TV sets. The average U.S. adult spends 54 minutes per day watching video on “connected TV” sets, compared with just 13 minutes on smartphones and seven minutes on tablets, per Nielsen. This finding is consistent with other data showing a decided tilt toward the TV set, not the handheld screen or PC, as the place to watch “streaming video.” Basically, people are watching Netflix and Hulu and Amazon Prime Video on the same screen where they watch college football on Saturdays and HBO on Sundays.

To be sure, Netflix, et al, deserve plaudits for freeing television from the living room and sending it off to iPhones and tablets and laptops. But it turns out those are fringe vessels. Most of the viewing has drifted back to where we started, as people choose mainly to watch television programs on…television. In the end, “streaming video” is mostly a way to get moving pictures and accompanying sound to show up on TV sets. And in this regard, it becomes apparent, or at least it should become apparent, that all this noise you’re hearing about how there’s a “streaming” video market and a “traditional” TV market and that never the signals shall cross is wrong.

Reality check
Thinking of television as somehow cleaved between separate technology and distribution architectures masks the reality. There is no “crowded streaming market” as was pronounced the other day by the Wall Street Journal, in trying to make sense of the looming entry of Disney and NBC into the world populated by the likes of Netflix and Hulu and Amazon Prime Video. If there was, all Disney and WarnerMedia would have to do is thrust and parry within a neatly defined environment. Their field of play would consist only of those video services that get to where they’re going by way of the Internet: the Shudders, Crackles, Pluto TVs and CBS All Accesses of the world. They wouldn’t have to simultaneously contend with the reality that there’s a PBS and a FOX and an ABC and a Discovery Channel and a college football game on ESPN and a movie on Lifetime and stuff flowing over the airwaves all the time.

But they do have to contend with the likes of these competitors. Streaming video doesn’t get special dispensation because it “streams.” And if anybody’s economic model suggests it does, it’s probably worth rethinking those assumptions. This is true both for subscription-supported video-on-demand (“SVOD”)services and it’s also true for the new darling of digital media, the so-called “FAST” (free, ad-supported streaming TV) category wherein companies acquire rights to movies and TV shows, send them over the Internet and in so doing attempt to convince would-be acquirers that something generational is happening.

Still, we persist in applying false maps. Some of them, understandably, draw from observations about consumer behavior. A handful of surveys lately have informed us that human beings have their limits when it comes to streaming TV apps. One, a 2018 report from Deloitte, tells us the average U.S. subscriber maintains three subscription-based streaming services and points to an emerging phenomenon known as “subscription fatigue,” theorizing that people already are starting to grow weary of managing multiple video apps.

With apologies to Deloitte, of course they are. They also, if asked, would probably say careening among three separate grocery stores to buy three breakfast cereals is bothersome. But they probably would not complain about having access to multiple cereal brands from the Whole Foods down the street. The takeaway from Deloitte’s observations is that it’s increasingly silly to abide by the notion that television should be compartmentalized into delivery vessels requiring independent management by the user. People aren’t so much resisting the idea of new TV channels and networks and on-demand libraries coming into their lives as they are resisting the silly conceit that each one of them should be discretely tended to. Television still works best, is most convenient, and achieves the greatest scale when it’s not delivered in some sort of imposed isolationist artifice but is bundled into an accessible framework. If that sounds to you, dear innovator and market disruptor, disturbingly like cable TV, it should. Because it is.

Oh the irony
My favorite example of this irony came last week as somebody, somewhere (I can’t find it now but I’ll update this when I do), published an article suggesting that a neat symbiosis was coming to life around the intersection of SVOD and ad-supported streaming services. The take was that Pluto TV, the FAST service acquired earlier this year by Viacom Inc., provided a handy complement to Netflix or Hulu or Amazon’s Prime Video service. When you tired of watching Netflix, went the theory, you could whisk on over to Pluto TV. And all your television dreams would come true.

This is certainly a valid example. You can indeed go from watching a program via Netflix to watching a program via Pluto TV. Of course, you can also go from watching a program on Netflix to watching a program on ABC, HGTV, The Discovery Channel, The Disney Channel, ESPN, FOX News, Lifetime, AMC, USA Network, Bravo, A&E, CNN, History, NBC, PBS, MTV, Nickelodeon or TNT. And about 200 other television networks. All of these show up on the same place your streaming service shows up, and is most commonly watched, which is your television set. The idea that you will henceforth only gravitate from streaming service A to streaming service B overlooks about $70 billion worth of investment by consumers in access to a rich menu of TV choice. (That’s roughly the sum spent in the U.S. on traditional pay-TV subscriptions.)

Still, we latch onto this theme of separation-by-medium because we do what people always do when disruptive new media entrants come on to the scene, which is to view the inspiring vista of a new world from the cliff-edge vantage point of the old. Streaming services are seen, wrongly, as entirely new creatures that, like unicorns or the Loch Ness Monster, exist within an entirely different framework (or in the monster’s case, a lake). They’re seen as entrants with differentiating characteristics, and as such it’s presumed they must live in a narrow box while the rest of television operates on separate economic and technological and strategic premises.

The reality is that, like it or not, “streaming” services will be, and already are being, sucked like digital dust particles into the vacuum tube of the existing television business. This is an unpopular, very un-hip view, I understand, but it is the truth. You are not going to convince an entirely new body of human behaviors because you are sending video content in the form of IP bitstreams. You are going to have to live within the existing structures and old habits. You are going to have to recognize, if you have a clever idea for a new streaming service built around access to live concert archives (Stingray Qello), or a neat baseball highlights wraparound show (DAZN) or 1980s-era cartoons like “Doug” and “Rugrats” (Nicksplat) or tear-jerker made-for-TV movies (Lifetime Movie Club) that in the end you are going to have to live with being bundled into a greater whole. It may not be the cable-esque, coarse, force-fed bundle of old, but it’s going to be a bundle of something. Because that’s where the scale will be.

It is instructive, if a bit scary, to realize one of the success stories in direct-to-consumer video, at least in terms of good ‘ol American ingenuity and perseverance, is Acorn TV, the British import service conceived by the veteran media industry entrepreneur Robert L. Johnson of BET fame. Acorn is now part of the AMC Networks family of streaming services, but before it was acquired, it spent more than five years steadily, patiently, diligently amassing a subscriber base of just 650,000 accounts, or the equivalent of half of one percent of U.S. TV households. Five years, 650,000 accounts. If you have Johnson’s determination and a willingness to slug it out in wild, I’d say DTC video is your bag. If you want to aim for bigger things, faster, you’re not going to get there by waving your flag in the breeze as cars fly by. There’s a reason Johnson sold his company to a bigger, more integrated player.

An executive from Comcast, Matt Strauss, recently addressed a related aspect of this reality in a Variety story: “What’s ironic is that in many ways consumers have access to more choices than any other time in history, but at the same time there’s a significant amount of complexity,” he said. The idea is that bringing lots of services into one environment, effectively undoing that complexity, not exacerbating it, is what will provoke growth for streaming video. And for television at large.

He’s probably onto something. Streaming services like Disney+ and the king of it all, Netflix, fit well, and are apt to perform well economically, as part of an existing conceit that’s already established. It’s called pay television, and it has been around since the 1940s. The foundation concept is: You make a monthly payment to get moving pictures and sound on your screen. The not-so-fun work of delivering and managing and bundling these products falls to a third party.

Is Netflix or CBS All Access or Disney+ so different? I don’t think so. Netflix is revolutionary not because it presents a new model for delivering television, or because it disintermediates producer and consumer, but because it takes the old TV model and simply does it better. Netflix is a delivery mechanism for lots of television content, bundled into an organized vessel. It’s Spotify for video. Hell, it’s cable TV.

Or at least it’s a less expensive, more expansive, version of cable, and because it’s now in more than two-thirds of U.S. homes, I can argue that this whole business of denying Netflix access to licensed shows is questionable. Providers (like WarnerMedia and NBCU) are willfully choosing NOT to take advantage of the enormous scale of the nation’s most popular bundled video service. Instead, whether it’s out of genuine opportunity or, at the other extreme, worry about being left out of the cool group at school, they’re replicating the Netflix model, except on a smaller scale and probably with less cultural impact. The investment analyst Rich Greenfield suggests content owners would be wiser to play the role of “arms dealers,” transacting business with proven, established players — such as Netflix — rather than trying to go it alone.

It’s a fair point, given that “streaming” increasingly seems to be adapting to the old-school rules of legacy pay television anyway. The decidedly un-revolutionary quality of streaming is exemplified by some recent moves made by Comcast, the nation’s №1 cable company, along with some of its peers like Charter Communications, Altice USA and Cox Communications. One by one, Comcast et al are picking off the kingpins of streaming video and planting them on their cable TV services. Already, you can watch Netflix, Amazon Prime Video, YouTube, Tubi TV, Xumo, CuriosityStream and other “streaming” services via Comcast’s Xfinity, in pretty much the same way you watch ESPN, MTV or The Discovery Channel or PBS. They’re in the box, on the menu and readily available on your TV screen (where, remember, most of the viewing to streaming services takes place).

Knowing this prompts legitimate questions about whether “streaming video” really exists in its own invented world, as the conventional wisdom suggests, or whether it already has been co-opted into the existing pay-TV environment.

Change agents
This is not to say streaming hasn’t changed television. It has. But not in the way you think. What streaming video did that was revolutionary was to blow up not the delivery model for television but the payment model for television. Netflix’s brilliance was identifying an end-around that exposed the absurdity of cable packaging models. It was like that grade-school exercise where you’re invited to imagine yourself as a Martian who descends to observe life on earth, and you point to inexplicable oddities people accept as immutable realities, like Pringles. What Netflix did, once it pivoted from mailing physical DVDs to sending bits over the Internet, was to combine plentiful choice with easy access and affordability. If that motif sounds familiar, it’s because it is. These are the exact same concepts — choice, convenience, affordability — the cable industry used to deploy to attract subscribers in the day. Netflix didn’t so much invent a new form of television as it improved on the model of the old — and priced it for the masses.

True, that “old” model was overdue for change. For decades, the prevailing mechanism for receiving and displaying television was a preconceived bundle of linear channels, force-fed to a nominal glass screen (a TV set). Media companies like Viacom and ABC and Time Warner Inc. ginned up concepts for TV content (Tennis! Heavy metal music! Reruns! Comedy!), put them into a bucket called a “network” and hired a bunch of likable college graduates to travel to Tulsa and New Orleans and Sacramento to convince operators of cable systems to “carry” them. The reward was a thing of economic beauty: These cable system managers in Tulsa and New Orleans and Sacramento agreed to pay a few pennies per month for every subscriber to whom they sold their do-it-all bundles. Month after month, channel after channel, it added up to bazillions of dollars. For a while it was the greatest gig in television: working as an affiliate relations rep for a cable network. “You couldn’t get out of the way of the money,” a network rep once told me during a bus ride home from a party at some 1980s-era cable convention in some city (it might have been New Orleans, I think). That line always stuck. If you were one of the lucky programmers “in” the system, life was sweet. The scheme was television’s analogue to vinyl records or compact discs: a balky, clumsy and expensive way of getting a particular song to play through a particular speaker, but for a long time the only way.

Except once people got a taste of a new way, there was no going back. It’s telling to realize subscription-supported music on-demand (basically bundled music) now has risen as the recorded music industry’s №1 source of revenue, injecting a welcome zing of growth back into a moribund category. I see in music’s transformation where television is going: a packaging agent (Netflix, Comcast, AT&T) puts most everything you want into a bundle. It’s not a bundle of linear channels, but it’s still a bundle: of live channels plus discrete, on-demand TV shows. (A modernized, digital-era example is the bundled-video amalgamation VRV Premium from WarnerMedia. Take a look.)

This is why it’s misleading to consider direct-to-consumer streaming video a category unto itself, with its own proprietary economics and neatly boxed-off contours and heady predictions about growth, such as one released this month by TV industry watcher Digital TV Research, which projects a bunch of new subscribers for a handful of leading streaming providers through the year 2024. Netflix alone will have 219 million by then, the projection says. Reading these sorts of prognostications, you are tempted to think the world is surely mutating into halves: the “old” television industry on one hand, and the “new” television industry on the other. And that never the two shall meet, and the old world is rapidly fading, and the loser now will be later to win, and get out of the way if you can’t lend a hand, and so forth.

But here’s a statistic you might find interesting: Let’s say Disney hits it out of the park, attracting 20 million Disney+ subscribers within just 12 months at $7 per month in average revenue per subscriber. When that day comes, the service will generate the annualized equivalent of about $1.7 billion in revenue. A rousing sum, to be sure.

But guess where that will put Disney+ by today’s income statement? It will be the equivalent of about 3% of the company’s total 2018 revenue ($59.4 billion). Disney’s 2018 operating profit from theme parks ($5.4 billion) could wind up being 3x greater than the entire (bullish-case) 2020 revenue projection from Disney+.

Disney+ is an interesting pivot that takes advantage of new possibilities for television delivery. But a game-changing revolution it is probably not.

One of the smart guys of the modern media business, Liberty Global’s CEO Mike Fries, explained this to me recently during an oral history interview for The Cable Center. It’s a hedge, he believes. If the world does indeed gravitate to new forms of television subscription, Disney has a place to grow from. If the much-larger constellation of cable and satellite TV bundlers continues to dominate the economics of television, then Disney remains well-situated there, too, as it currently collects billions of dollars annually in license payments from these partners, and stands to increase that sum by allowing Disney+ to live within the familiar confines of traditional cable TV. Comcast alone spent $13.2 billion in 2018 making payments to its programming suppliers, Disney included. Of note is that a recent press release describing terms of an affiliation deal between Disney and the cableco Charter envisions making Disney+ available though the Charter video service. Maybe we should stop calling it DTC and start calling it ITC: “indirect to consumer.”

This reality underlies my quibble with the “streaming is becoming crowded” argument. It presumes there is an identifiable, meaningful thing called “streaming” which operates on an entirely different set of precepts, economics and consumer propositions than old-school “television.”

This idea collapses when you simply think about the way you, or anybody in your life, watches television. Because: Remember the other night when you finished shoving the dinner dishes into the dishwasher and turned to your partner and said: “Lovebug, let’s saunter to the living room, fire up the Roku and stream us some video?”

Me neither. You might have caught the finale of HBO’s “Big Little Lies” or watched “The Good Place” on NBC or watched the Nationals come from behind against the Mets on MLB.TV (seven runs in the ninth inning!) or been entranced by “Killing Eve” on BBC America. But you didn’t consider you might have been “streaming” TV. You were merely watching it. On a TV set. In the living room. On the couch. Just like you did in 1987. And 1993. And 2014.

Here, reader, I will duly concede that for a brief window there actually were important differentiators between television of the “streaming” sort and television of the “traditional” sort. There were four, to be exact.

  • Thing One was depth and wealth of content that started whenever you pushed “play.” This is the vaunted “on-demand” quality of delivery that is associated with (but not uniquely tied to) Internet-powered streaming services. Netflix and YouTube taught us that television was something that would respond to our wishes and whims and start times, and for that we are grateful.
  • Thing Two was the manner in which this wealth of content was presented, which is the whole “UI” experience that streaming services like Netflix brought to the forefront (and which now is an expected table-stakes element of modern television). Menus and recommendation algorithms and colorful poster art will henceforth adorn our glass screens.
  • Which brings us to Thing Three: multi-device integration. Sending signals to iPhones and tablets and TVs rigged up to the Internet. That was a big deal. But now everybody does it.
  • Thing Four was a more inside-baseball thing: the ability to inject commercial messages with Internet-like agility and targeting acumen. Viewers didn’t give much of a rip, but it helped advertisers get excited about the streaming video category. And made people like Pluto TV’s founder Tom Ryan, who sold his company in January for $340 million, look really smart.

These were big distinguishing elements early on, but now they’ve been subsumed by everybody to the point where they are taken for granted. Look to Comcast’s Xfinity, or to TiVo Inc.’s Roamio platform, or to Altice USA’s Altice One streaming service, or to the popular Roku environment that’s now 30 million accounts strong and growing. How does Netflix or Crunchyroll or Shudder look and perform relative to A&E or The Discovery Channel or TBS within these delivery frameworks? Pretty much the same. Old TV channels and new TV channels and “streaming” TV channels and “broadcast” TV channels live and operate and contend for viewers in both linear and on-demand flavors without any particular technology tilt. We’re past that.

Meet the new boss
It is into this world of sameness that NBCU and Disney and WarnerMedia and other aspirants and existing players plunge. Again, class, let’s repeat: There is no “streaming” category and there is no “legacy” category. It’s all the same thing: moving pictures on a screen. What these companies and others are doing is dipping into a newish set of consumer expectations and spending patterns. But in the end, it all fuzzes together.

Given this reality, what TV companies should do, and I think some are doing, is recognizing the important distinctions are about content and engagement, not technology or walled gardens or artificial divisions. The CEO of AMC Networks, Josh Sapan, makes this point convincingly during quarterly earnings calls. What we think of as a technology model for television (streaming) Sapan thinks about, instead, in terms of human behavior and preference. Passionate audiences paired with dedicated television services (Shudder, Sundance Now, Acorn) make for a real business. But it doesn’t so much depend on the exploitation of a new video delivery mode as it depends on aligning content with fans through whatever pipe is handy. AMC is doing what it and others have always done: using television to provoke payments from viewers. Streaming the stuff presents a new twist, but not a new industry.

So when NBCU tells you it’s going to start a “streaming video” service, understand the bigger context. What NBCU is doing is recognizing there are now new ways to launch a TV channel (or a collective of content housed under a common brand identity) that are notable not for their technology underpinnings but for their willingness to sidestep aging economic strictures.

NBCU will get its new channel to you the old way — slapping it onto the cable/satellite/telco-TV set-top — along with the new way — sending it out over the wild of the Internet, where it will live alongside everything from YouTube videos to live wrestling via WWE Network. In a way, NBCU is sort of shrugging about the means. The goal is what it always was: get moving pictures and sound to a glass screen, and figure out a way to get paid for it.

If I accomplish nothing more here (which is a keen possibility) I hope to convince the world that there is no more “streaming video” on a grand commercial scale. That ship sailed not long after the pioneering Real Networks Inc. founder Rob Glaser and crew figured out how to get a Jewel music video to play on a computer screen in the late 1990s.

Technology is no longer a difference-maker. The way to hit a home run is to grind away not at a technology conceit but an audience conceit. You have to prove your shows will attract interest and attention and love and economic support from human beings. You can find these viewers in different places: at the end of an fast, broadband IP connection, or via a living room TV set that’s hooked up to a “direct broadcast satellite” platform, or through a cable system, or even by virtue of a modernized version of a rabbit-ears antenna (which are surprisingly popular lately). Doesn’t really matter much how your stuff got to the screen. It’s whether anybody pays attention that is, and has always been, the currency of the medium. So maybe let’s stop calling it “streaming video” or “over-the-air TV” or “cable.” From now on, let’s just call it “television.”

Stewart Schley writes about media, technology, sports and whatnot for research firms and the occasional business magazine. Explore both the vastness and the vacancy of his thoughts further at @stewartschley, stewartschley.com or, if you’re a music person, at 33hifi.com.

Stewart Schley

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Writer, editor, media industry analyst. Fan of electric guitars. Believes in Santa Claus and baseball. Some light dusting.

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