Streaming video times are coming
How the on-demand video is overtaking pay-TV service
By Eduarda Hillebrandt
“Give people what they want, when they want it, in the form that they want it in, at a reasonable price” is Kevin Spacey’s advice to make people “more likely pay for it rather than steal it”. The artist’s speech at the Guardian Edinburgh International Television Festival in 2013, is about the era of streaming video service. As Frank Underwood in House of Cards, awarded Netflix original series and movies are permeating households and pop culture.
The climbing of subscribes all over the word justifies Reed Hastings, Netflix’s founder and CEO, optimism in 2016. The company reached 130 countries, including the Indian market and a deal with Bollywood. This year, the multinational provider will invest U$ 5 billion on film production — which means the annual HBO budget twice.
Something changed about entertainment consumption model. Subscription video on demand (SVOD) platforms are surpassing pay-TV. A one-to-one delivery with pulled content — led by Netflix, Hulu and Amazon Video — is replacing the one-to-many transmission. Time Warner is awake: HBO Go is an alternative skinny bundle to U.S., Scandinavian countries, and Spain soon.
“Give people what they want, when they want it, in the form that they want it in” Kevin Spacey
Cable network business was born by the 80’s, driven by a development of coaxial capacity. The technology came in U.S. households over the last decade. Now, the cord-cutting nightmare is real. The eMarketed, a digital media researcher, provides that the number of U.S. households with traditional TV packages will drop below 100 million by 2017.
Cord-cutting is accelerating and the market is changing according to the demand created by internet. A reason for that is the cost: a cable bill reached about $99 per month in 2014, while subscriptions to Netflix, Hulu Plus and Amazon Prime have plans that start at less than $10 a month. The bulk of on demand audience is on 18–36 age, so they won’t buy bundles which 17 of 200 channels are really watched.
The advertisement follows mainly the viewership. Moffett Nathanson Reserch’s forecast is that ad spending on TV will decrease by about 3 percent each year through 2020, while online advertising will increase each year by around 12 percent. By 2017, online advertising led by Google and Facebook will surpass spending on TV ads.
A recent research of Citi Analysis shows that in long-term only sports enthusiasts will subscribe to pay-TV, because sport isn’t available on SVOD platforms. There’s a winner: The Walt Disney Company, owner of ESPN, may survive.
Media companies like Disney and Viacom have increased the cost of dragging their networks by 8%-10%. Meanwhile, content distributors have only increased prices 3%-4% on consumers. A disparity like that means that if Disney goes direct-to-consumer, it would lose about half of its pricing power.
That’s the mayor challenge, but not the only one.
