Even in the best of times, the seemingly endless options of new streaming services were going to force consumers to make difficult choices about their sources of entertainment.
During the sudden economic downturn triggered by a global pandemic, the scramble for subscribers promises to be even more strained, potentially creating more outright losers in the competition.
Those challenges come as CNN’s parent company WarnerMedia becomes the latest major player to brave the streaming wars with HBO Max, which also happens to be the priciest studio-offered service. Although it will be free for HBO subscribers, the price is $14.99 a month with a 25% savings for 12-month preorders.
HBO Maxfollows Disney (DIS)+ — which, priced at $6.99, has already ballooned to more than 50 million subscribers — and Apple TV+ into a landscape where Netflix (NFLX), Amazon (AMZN) and Hulu (the last also a Disney (DIS) shingle) have their own relationships with consumers.
“Naturally, consumers are going to be careful about what subscription services they commit to now,” Zak Shaikh, vice president of programming and entertainment at research-based media firm, Magid, told CNN Business. “That said, the value of streaming is still pretty high when you compare it to, say, going to the movies or other forms of entertainment.”
The streaming world during coronavirus
The irony is that people have been watching more television — both streaming and traditional. TV ratings spiked in the first few weeks of quarantine as a byproduct of the shelter-at-home orders, per Nielsen data, with gains across a broad cross-section of network programs.
That phenomenon has cooled somewhat, and other alternatives, like game consoles, have contributed to the surge in screen time. But even as those orders gradually ease, the expectation is that people will be spending more time at home, looking for something to take their minds off the pandemic. Historically, TV usage has risen in tough economic times.
Still, the entertainment industry’s shift to a subscription model means consumers are paying directlyfor content, as opposed to the tradeoff of watching advertising. And while cable, satellite and internet providers offered a bundled array of options, the move to à la carte menus could further hurt the industry because of the current crisis.
Traditional operators have already seen their models compromised, as subscribers engage in what’s known as “cord cutting” — dropping pricey monthly bills to access content by other means. AT&T, for example, recently reported the loss of nearly 900,000 subscribers — primarily to its DirecTV service.
Even before the pandemic struck the acceleration of cord cutting has fueled questions about whether or not the traditional TV business is essentially living on borrowed time. In February, the Wall Street Journal noted that cable and satellite companies lost 5.5 million subscribers in 2019, significantly exceeding declines from the previous year.
“The commitment for a pay TV service is a far bigger portion of the wallet than one or two streaming subscriptions,” Shaikh added.
The studio-backed streamers have represented a hedge against those losses, especially for AT&T (T), the owner of Warner Media, and NBCUniversal parent Comcast (CMCSA), whose service Peacock is also launching soon. It’s an attempt to take control of their own programming destinies.
The competition to establish new services has also created an expensive arms race to provide must-have content, with studios planning to absorb expenditures into the billions.
Who will prosper and who will be on the outside looking in?
As analysts have noted, signing up for an array of streaming services can quickly add up to as much as cable or satellite bills, while forcing consumers to go through the process of deciding what they want to watch and investing the time in figuring out where it’s available.
Adding up the cost for newcomers HBO Max, Disney+ and Apple TV+ with services such as Netflix, Hulu, Amazon and CBS All Access, it’s not hard to get close to the price tag for cable, potentially with less programming options overall.
There have already been some potential setbacks. Quibi, for one — an on-the-go video service that launched in the teeth of the quarantine lockdowns — admitted to underperforming in its first month. Co-founder Jeffrey Katzenberg attributed that to the impact of the coronavirus.
Netflix clearly enjoyed a head start and has a deep roster of content that has seemingly bolstered the streaming service’s position, certainly in the eyes of investors.
But the question remains: Who else will prosper and who will be left on the outside looking in as entertainment budgets are maxed out?
“Many services will respond with adaptability and with speed while others will take a lot longer. It’s difficult to necessarily single out any specific companies without knowing how they plan to pivot,” Shaikh said. “But what seems increasingly clear is that services with a larger portfolio of content will do better than the services that are relying on a handful of titles to bring in subscriptions.”
