i3 - September/October 2019 - 46

Business

By Gary Arlen

C S PAC E

 W 

hen Netflix's July financial report revealed the company
had lost U.S. subscribers for the first time, Wall Street
pummeled its stock price as if this blip augured the end
of the streaming video boom. The simultaneous announcement
that Netflix is launching an ultra low-priced (under $5 per month),
limited access subscription in India added to the frenzy. In reality,
Netflix added subscribers worldwide during the spring quarter.
Yet the Netflix developments may mark
the demarcation point between the first
wave of subscription video-ondemand (SVOD)/over-the-top
(OTT) streaming and a new
era of multi-tiered services.
These changes come amid
analysis that points to new programming tactics, pricing
changes, increased ad-based OTT
and looming video piracy threats - all
emblematic of the maturing industry.
The entrenched dominant OTT
providers -
Netflix, Amazon
Netflix,
Prime and Hulu
Amazon Prime and $37 per month total, but that
are facing new
competition as
Hulu are facing new the typical optimum price is
popular entertain- competition as pop- $21. Those figures may shape
ment providers
ular entertainment the demographics of subscribers
prepare to offer
to new services. Disney Plus will
providers prepare debut at $7 per month, while
streaming serto offer streaming HBO Max (fromWarnerMevices. Disney Plus
services.
will include condia) is expected to cost $17.
tent from Disney's
Apple and NBCUniversal
new Fox subsidiary as well as
have not yet confirmed pricing.
their immense archive, debuting in
Of course, these prices are small comNovember, while Apple TV Plus will also
pared to typical cable bills. More than
rollout this autumn. AT&T-owned
90% of U.S. cable subscribers pay
WarnerMedia will begin beta-testing
upwards of $50 per month for basic
HBO Max by yearend, and the
video service. AT&T says some of
NBCUniversal service (owned by
WarnerMedia's streaming ventures will
Comcast) is scheduled for delivery in April. be optimized for mobile receivers.
Meanwhile, researchers are identifying consumers' willingness to pay for OTT. Programming Options will Change
One study found that $17 to $27 per
While many of the shows from the OTT
month is the "sweet spot" in Americans'
providers will come from their archives,
budgets for this entertainment. The
they promise a plethora of original proHollywood Reporter/Morning Consult
gramming. Apple TV Plus has recruited
poll determined that OTT customers pay
such filmmakers as J.J. Abrams, Steven
46

SEPTEMBER/OCTOBER 2019

i3_0919_BUSINESS_CSpace.indd 46

Spielberg and M. Night Shyamalan
plus celebrity producers to create new
shows for the service.
AT&T promises that HBO Max will
include live sports and news drawing on
WarnerMedia's relationships with Major
League Baseball, the National Basketball
Association and the NCAA. NBCU's
streaming service will largely consist of
acquired programing such as The Office
comedy series that will serve as a "tentpole," says NBCU CEO Steve Burke. The
Office was previously available on Netflix
and represented about 4% of that service's viewership volume, Burke says.
Analysts are split about the impact
of these varied approaches to the new
streaming ecosystem. Some insist that
original programming engages viewers
and encourages them to retain an OTT
subscription, other analysts believe audiences prefer a vast library of archival titles.
Pricing is also part of this equation. A
new TDG Research study found that
Netflix subscribers are willing to watch
streaming advertisements if it prevents
subscription price hikes. Netflix does not
run advertisements and has no plans to
do so. Several of the emerging OTT providers are developing hybrid
approaches, which includes ad-based
options. In August, Disney announced it
will offer a bundle of Disney Plus, Hulu
and ESPN Plus for $13.
Separately, research from Parks
Associates has quantified an emerging
problem facing the OTT industry: video
piracy. Parks said that OTT and pay TV
companies will lose an estimated $9.1
billion to piracy and account sharing
this year. By 2024, that figure will climb
to $12.5 billion.
Brett Sappington, Parks Associates'
senior research director and principal
analyst, observes that video enthusiasts
like to "engage with many different services." The advancing wave of streaming
video options will definitely give viewers
a choice of distinctive services.

Man at Work/Getty Images

Next Generation Streaming

I T I S I N N O VAT I O N

9/9/19 1:34 PM



i3 - September/October 2019

Table of Contents for the Digital Edition of i3 - September/October 2019

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i3 - September/October 2019 - Contents
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