More Streaming Services Entering the Market

The entertainment media has been awash in the last couple weeks with one announcement after another of another company making or adjusting their plans for a streaming subscription service. CBS Films will be absorbed by CBS Entertainment Group and tasked with finding or developing original features for CBS All Access. NBCUniversal has revamped its executive team around an anticipated “low key” streaming launch in 2020. Amazon’s IMDb has launched Freedive, an ad-supported service offering free TV shows and movies. Sinclair, tired of restricting its disinformation campaigns to broadcast, will debut STIRR, including all its libertarian propaganda.

All that comes just as Netflix announced a price hike for all subscribers, a move seen by analysts as a sign of confidence its membership will gladly continue to pay the increased fee in exchange for access to its growing catalog of original content.

All of these companies are competing for a piece of a pie that’s seen as growing, which is why there are a whole slate of serviced primed to launch in 2019. The Digital Entertainment Group just reported that spending on home entertainment had risen to a record $23.3 billion in 2018, growth driven almost exclusively by streaming platforms. Video on demand and digital purchases also rose, while physical disc sales were the only category that fell.

So if the consumer spending is gravitating to streaming that’s where media companies want to be. It’s a movement driven not only because of demand but because by offering their own platforms they can capture more of the audience data generated by usage instead of sharing it with Netflix or other aggregators. That’s particularly important when you consider AT&T and other companies are using such platforms as expansions of their advertising targeting capabilities, which is why it was big news that Nielsen will begin including OTT and mobile viewing in its measurement reporting, offering a more complete picture of audience size to advertisers.

The belief seems to be that people will keep on adding new subscriptions, driven by the perceived value of the content available. So NBCUniversal’s will undoubtedly be what finally grabs “The Office” from Netflix just as WarnerMedia’s will eventually have an exclusive on “Friends.”

Price is going to be the biggest factor in just how successful these ventures are. While a recent report revealed 56 percent of respondents prefer streaming platforms as a way to watch their favorite shows and movies an earlier study from last year claimed the spending ceiling most people identified $20 as the most they’re willing to pay for such subscriptions. If Netflix, the dominant player in the market, eats up $13 of that there isn’t much left over for others. That may be one reason why the idea of streaming bundles as an alternative to cable is being floated as it would replace five smaller recurring charges with just one.

The fight being mounted against Netflix isn’t coming cheap, though. AT&T acquiring Time Warner, Disney acquiring Fox…those moves and others like them are meant to counter the streaming giant, which is seen as a clear and present danger to the business model of studios, networks and other entrenched players. They’re being financed with massive amounts of debt, though, and the financial servicing of that debt is a major drain on cash flow and other resources. So, as Variety points out, not only are these companies taking on shattering organizational changes to play in the streaming market, but they have to walk the line between charging enough to keep paying down debt while not honking off subscribers.

The margin for success, then, is thin.

Just ask those in the retail industry, which is facing a debt crisis of its own. After all it was private equity, not shopper apathy, that did in Toys ‘r’ Us. Sears couldn’t invest in its stores and operations because it was busy financing its debt. And Gymboree, bought by a private equity firm nine years ago, just filed for bankruptcy a second time.

While the entertainment media industry may want to believe it’s immune from whatever economic downturn may be coming, the leveraged debt being taken on by corporate America is increasingly worrisome to investors, who smell a recession coming. If and when it does, consumers will be cutting back on discretionary spending, a category that includes entertainment.

Eventually the camel’s back will be broken and there will be a significant shakeout in the streaming platform market. Whether that comes as the result of consumer preferences – they signal they’d rather watch the fifth season of “One Day At a Time” on Netflix over rewatching “The Good Place” on NBCUniversal’s service – or because corporate debt becomes unmanageable and a service is shut down matters only to those who track such things for a living. For the audience it just means they will have to adjust which subscriptions they are managing.

Author: Chris Thilk

Chris Thilk is a freelance writer and content strategist with over 15 years of experience in online strategy and content marketing. He lives in the Chicago suburbs.

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