How did we ended up paying 50 dollars for TV again?
It was not long ago when streaming was herald as a money saver for consumers without having to compromise quality. Does days are quickly coming to a close.
Streaming Arrives
The technology columnists promised us we could have all the content we could ever need for 10 dollars a month. This message helped Netflix grow at an impressive rate. In just a decade Netflix became larger than all Cable providers combined.
Netflix started with an impressive catalog. Thousands of movies, any time you want and you didn’t have to leave your house. Netflix was so disruptive that Blockbuster into bankruptcy.
The next major breakthrough was House of Cards. On 2013 Netflix created their first Original Series. Which legitimized it in the eyes of many that they could also make prestige television.
The CEO of Netflix credited the success of the show with algorithms the company had created. Giving then insight that no other company could ever dream of what customers want.
Since then Netflix has had many other successes: Orange Is the New Black, Narcos, Stranger Things, The Crown, 13 Reasons Why, Daredevil, Jessica Jones, Unbreakable Kimmy Schmidt, Master of None, Russian Doll, BoJack Horseman and many others. (Like no joke. Netflix has released over 1,500 hour of original content. It would take 4 hours everyday for a year to watch it all.)
Netflix has become impossible to miss. If you want to be part of the cultural zeitgeist you need a Netflix subscription. It was giving an excellent product for an affordable prize.
Why was it Too Good to Last
Netflix’s quantity and quality of content was always unsustainable and could never last. The Golden Age of Streaming is coming to an end.
Reason 1: Library is Shrinking
The reason Netflix could have a giant library back in 2010 was because streaming rights cost less when streaming was getting started.
No one knew how much streaming was worth. They overestimated the cost of running the service and underestimated how many people would sign up. So they sold their libraries for so Netflix got ludicrously large libraries for much less than they should have been worth.
Every time Netflix is about to lose the rights for a show. The content owner know that the answer of “how much are streaming rights worth?” is about $125 Billion dollars based on Netflix’s stock price.
Reason 2: Competition
Back in 2007, no media company couldn’t have replicated Netflix. Even if they wanted too. None of them had the technology necessary to do so.
The main reason they were unprepared for streaming is that most of them did’t want streaming to become mainstream. They were hoping it would be a fade that would go away. Streaming meant less revenues from DVD Sales. By the time Netflix became a household name it was too late.
Things have changed now. Most major entertainment companies either already have or are planing to release their own streaming service soon.
CBS All Access (ViacomCBS) had been out for a while. Disney+ (Walt Disney Corporation) and Apple TV+ came out in the last few couple months. HBO MAX (Warner Brothers) and Peacock (NBCUniversal) have been announced for 2020.
The main selling point of all of these services is their extensive back libraries. To make does selling points it means that no one else can have access to them. Taking them away from Netflix’s reach
In addition remember when I said the Netflix CEO said that he used innovative uses of Big Data to decide which shows they green lit. It was mostly PR talk. Even the CEO has had to backpedal, so people would stop bringing up how it was clearly a lie.
House of Cards was a show created by Academy Award winning director David Fincher starting two Academy Award winning actors. Then they gave it a one million dollar budget per episode. House of Cards wasn’t a risk. It was as safe as it could be.
The real reason Netflix could get hit after hit was not because they were better at picking. It was because they had more money.
The way that financing work for a TV channel is that 500 or so channels have to divide the 70 dollars between all of them, but Netflix got 10 dollars from more people than any service had.
So if any script for a show started getting buzz as a possible hit, Netflix could out bid every traditional network
Now that there are other streaming services and they are investing huge amounts of money into original programming. Handmaid’s Tale, Fleabag, and The Morning Show are the crow jewels or Hulu, Amazon Prime and Apple TV respectively. Netflix got outbid on all of them.
Netflix hasn’t been able to increase their membership numbers fast enough to justify an increase of spending in content to maintain their status as the only one who can buy prestige television.
This has two main results. First if you want to keep up with every pop culture obsession you will have to subscribe to more and more services. Second, since every show cost more, there is going to be less shows overall.
Reason 3: Price
Seventy dollars for a cable subscription may seem like a steep price. But it was one that we were willing to pay. Otherwise the cable company would have crated bundles with less channels, so it could charge less.
So even if you cut the cord when Netflix came out you have probably slowly added services over time. Netflix is $12.99. You probably want Hulu for broadcast shows. Why not… $5.99 is pretty good deal. Also Game of Thrones won’t want watch itself so that’s another $14.99.
Just does three services is $33.97 a month already. Which is still less than a cable subscription but we are 50% there already.
When I was interviewing people. I found that the most important question was “How much money do I have to pay to watch all the big shows?” and that is a much different question. If that is the case you will probably want Amazon Prime Video for $8.99 and Disney+ for $6.99. No other service has had a must watch show so far. Which moves our total up to $49.99. Five cents cheaper than a basic cable package.
As David Trainer from Forbes has pointed out. It may not be that cable companies were over-charging us. They were charging us exactly as much as we were willing to pay
The Current State of Streaming
- Even with the competition Netflix is still on top and there seems to be no one who is getting close.
- Hulu is in a weird situation right now. It was originally created as a mutual partnership between Comcast, Disney, Time Warner, NBCU and Fox. Since the Disney acquisition of 20 Century fox, the future of the service not clear.
- Amazon Prime has gained a second pace among streaming services by attaching its service with free nest day shipping in Amazon.
- Disney+, Peacock, HBO Max and Peacock are trying to leverage their pre-existing libraries to break into the streaming business.
While researching this article. I interviewed a couple of people. I got very similar responses so I posted one of them.
On the Bright Side
So far this article has been down on the industry, so lets take a step back and remember how much better streaming is to cable.
Cable companies force you into contracts. They raise price the cost of their services after the first year. And use the fact that most people don’t have a choice in cable provider to over charge them.
In addition, thanks to streaming services the minimum cost of having access to prestige television has gone down from around $100 dollars to $12 dollars. I did say earlier that most people are willing to pay $50 or so dollars in entertainment per month, but some people don’t. Now they have the choice to do that.
The Definitive Guide to Streaming
Netflix ($12.99): Most of this article focused on Netflix because it has been the biggest service most of the history of streaming. It still is. It has the largest library of any service so it will have something for everyone. Highlights: Stranger Things, Friends, The Walking Dead, Sherlock, Peaky Blinders, The Arrowverse and Breaking Bad.
Hulu($5.99): The main feature Hulu has is next day streaming. Most shows from public television (except CBS) will be available the next day on Hulu for 5 weeks. Highlights: Rick and Morty, Vikings, Fargo, South Park, Modern Family, The Good Place, Homeland and Parks and Recreation.
Amazon Prime Video ($8.99): Amazon Prime has one of the smallest libraries of all of them. It includes some premium content but most of it is not exclusive to it’s service. It does include Emmy-winning sweepers such as “The Marvelous Mrs. Maisel” and “Fleabag” Highlights: Free Next Day Shipping (Seriously the service is worth it because of the free shipping alone)
Apple TV+ ($4.99): Apple TV may not have the most content but it also doesn’t cost much + it’s free with the purchase of any new Apple product. Highlights include: The Morning Show, See, Dickinson, For All Mankind, Ghostwriter, Oprah's Book Club and Snoopy in Space. (This is also about their catalog)
CBS All-Access ($5.99): CBS is the most watched TV channel by a long shot. CBS All-Access gives you access to most of their back catalog. Plus some original content. Highlights: Twin Peaks, Star Trek, Elementary, The Twilight Zone, The Good Wife, NCIS, Blue Bloods and Frasier.
Disney+: Disney+ includes the extensive libraries from Disney Animation, Marvel, Lucas films and National Geographic. Most of the submissions are because movies are stuck in contracts with other companies. If you have kids or younger sibling it’s a must have since it includes every Disney Channel and Disney XD show. Highlights: The Mandelorian, The Simpsons, The Imagineering Story and High School Musical: The Musical: The Series.
HBO Max ($14.99): HBO had been the king of prestige TV until Netflix showed up, but that doesn’t mean they are not one of the best. HBO Max includes their entire catalog plus much more. Highlights include Friends, The Big Bang Theory, Game of Thrones, The Fresh Prince of Bel Air, DC Entertainment, Sesame Street, South Park, Rick & Morty, The Wizard of Oz and the entire Ghibli Film Collection.
Peacock (TBD): Peacock is NBC’s streaming service. Named after their logo. The service is expected to include series from their back catalog plus original shows from Universal Pictures, Focus Features and DreamWorks Animation. Highlights: The Office, Parks and Recreation, 30 Rock, Brooklyn Nine-Nine, every season of SNL, The Fast & Furious Series, Jaws and Back to the Future.
