Cord cutters face a sea of streaming options
Cord cutters face a sea of streaming options
Meg James and Yvonne Villarreal January 1, 2016 8:01 PM
Like millions of other consumers, Evan Hartstein was fed
up with pay TV.
The 40-year-old father of two was paying nearly $250 a
month for a bundle of phone, high-speed Internet and hundreds of cable channels
that he and his family barely watched.
So Hartstein and his wife recently ditched their standard
cable TV subscription and instead signed up for Sling TV, Netflix and a few
other streaming services. Their monthly bill was cut in half.
"I got to the end of my rope," said Hartstein,
of Scottsdale, Ariz. "I just wasn't getting the value out of it. We'd
watch maybe 10 channels total. Why do that when there's this whole world out
there where you can pick and choose just the stuff you want?"
Hartstein's decision was made easier because of a flood
of Internet streaming services that allows consumers to cobble together their
own video packages. There are more than 100 Internet video services operating
in the U.S., with at least 40% launching during the last two years, according
to Dallas consulting firm Parks Associates.
Although Netflix, Hulu and Amazon Prime kicked off the
streaming revolution, the field is getting more crowded with new entrants
serving up niche programming including wrestling, Japanese anime and South
Korean soap operas.
The new TV landscape is forcing traditional media
companies to join the fray. To keep up with changing viewer habits, major
networks — including CBS, HBO, Showtime and Spanish-language Univision
Communications — have put aside concerns about potential cannibalization of
their traditional channels and embraced this so-called over-the-top delivery of
television programming.
This month NBCUniversal plans to launch its $3.99-a-month
comedy channel dubbed SeeSo, and other major networks are expected to follow
with their own channels. Even Lucas Oil Products is rolling out a streaming
site for motor sports enthusiasts called LucasOilRacing.TV.
"The proliferation of devices and the low cost of
these services have finally enabled people to have real choice," said Adam
Ware, head of digital media at the Tennis Channel, which launched its streaming
product in 2014. "And it has happened faster than anyone expected."
The sheer number of options, however, can be overwhelming
for many consumers who are used to making one payment for their TV service. The
offerings and prices for different services vary widely, making it difficult
for consumers to comparison shop. Some services, such as Sony Pictures
Entertainment's Crackle, are free, while others, including Univision and
LucasOilRacing.TV, extend discounts to customers willing to pay for a full year
in a lump sum rather than monthly installments.
"Consumers, by and large, are delighted by the
opportunity to get more control," said Brett Sappington, director of
research of Parks Associates. "But the challenge comes from finding all of
that content. You have to go into each service to find out if the content you
want to see is available."
Fueling the streaming mania is the spread of high-speed
Internet capable of delivering high-quality video, an increased appetite among
viewers to watch video on their tablets and smartphones, and the popularity of
the services themselves.
"Consumption patterns are changing and that's why we
are seeing this proliferation of channels," said Todd Supplee, a partner
at PwC's entertainment and media practice.
Parks Associates estimates that 98 million homes in the
U.S. have high-speed Internet connections. Now, an estimated 15% of American
adults are considered "cord cutters," people like Hartstein who
dropped their pay-TV subscription, according to a Pew Research Center report in
late December.
Another growing group — a younger-skewing crowd known as
"cord-nevers" — represents about 9% of American adults. They have
never subscribed to TV channels offered by a cable, satellite or
telecommunications provider. The Pew study found that young adults, those ages
18 to 29, are the least likely to pay for cable or satellite TV.
Netflix, YouTube and other Internet options have become
the entertainment destination of choice for many young adults. This cohort is
more attached to their phones than the big screen in the family room.
As consumer habits change, TV networks recognize the need
to adapt.
"2015 will be remembered as the year that the
disruption hit everyone," said David Nevins, president of Showtime
Networks Inc., which launched its own stand-alone streaming service last summer
to attract customers who don't already subscribe to a premium cable package.
With an estimated 10 million homes in the U.S. that have
high-speed Internet but not a pay-TV subscription, big media companies have
been eyeing a large and potentially lucrative market to tap. They also didn't
want to cede the streaming market to technology companies, such as Netflix,
Apple Inc. or Google. Cable pioneer HBO also launched a stand-alone streaming
service.
"We are looking at evolution — and we need to be
where our audiences are," said Jim Lanzone, president of CBS Interactive,
which manages the network's $5.99-a-month video-on-demand and live-streaming
digital channel, CBS All Access. The service has a trove of thousands of show
episodes, including "NCIS," "The Good Wife" and classics
such as "The Brady Bunch." And plans are in the works for a remake of
"Star Trek."
"We have room to expand the canvas to include
programs unique to digital that we don't have room for on the broadcast
network," Lanzone said.
This new digital frontier has given rise to a bounty of
specialty channels that offer something for just about every TV viewer. A
recent Nielsen report found stand-alone subscription video services in 46% of
U.S. households by the end of the third quarter of last year, up from 40% the
year before.
Professional sports, including the National Football
League and Major League Baseball, play in the space alongside veteran TV
programmers, including Lifetime, Nickelodeon, World Wrestling Entertainment and
Tennis Channel. The goal is to appeal to super fans willing to pay extra for a
channel devoted to their particular passion, whether it be "Wrestlemania,"
children's cartoons, Lifetime movies or more obscure tennis matches.
"It's not like we are using the same
programming," said George Barrios, chief strategy and financial officer
for WWE. "It is different content on the different platforms."
WWE now boasts 1.3 million subscribers for its
over-the-top network. A fifth of those subscribers live outside the U.S.,
demonstrating international growth prospects for some of these channels.
Another popular upstart is DramaFever, a streaming
service showing South Korean soap operas and Spanish-language telenovelas. Fans
of documentaries can sign up for Docurama, which has 1,200 titles, operated by
Cinedigm. The independent distributor also offers, for $4.99 a month, the Dove
Channel, which programs such family-friendly and faith-based fare as
"Highway to Heaven," "Fraggle Rock" and the "New
Adventures of Black Beauty."
"Now these smaller players can have direct access to
the living room — if you combine that with the fact that over the last several
years, Netflix and Hulu have started to train people that paying for video is
something that you do," said Tom Pickett, chief executive of Ellation, the
parent company of streaming service Crunchyroll, which specializes in Asian
programming, including Japanese anime.
"I think that big trend has really helped fuel a lot
of new entrants into the space," Pickett said.
One successful new service is Crunchyroll, the seventh
most popular over-the-top service, which outpaces NFL Game Pass in paid
subscribers, according to Parks Associates.
Crunchyroll Chief Executive Kun Gao said his 9-year-old
company switched in 2009 from a user-generated video platform, similar to
YouTube, to a subscription service with licensed content. The service now
boasts 700,000 paid subscribers.
"Having a central focus is where we differentiate ourselves,"
Gao said. "We're really trying to super-serve our audience. That means we
go really deep in one area."
But as streaming services multiply, some consumers
complain about the difficulty of navigating the dizzying array of services.
Adding to customer confusion is a tangle of licensing rights, which has led to
inconsistencies and different tiers of service.
Hulu, for example, has a basic plan with shows that
contain ads for $7.99 a month. The Santa Monica firm also offers an
$11.99-a-month plan that it bills as "no commercials" even though a
handful of ABC prime-time shows, including "Grey's Anatomy," still
carry ads.
CBS All Access provides a live feed of network
programming, but it lacks one of CBS' most popular attractions — NFL football —
because the network has not secured the rights to stream the league's games.
The new distribution platform can change a mostly passive
activity, watching TV, into one that requires research and familiarity with
apps.
And then there is the cost. For example, high-speed
broadband plans offered by major Internet service providers, including
AT&T, Time Warner Cable and Cox, can range in price from $35 a month to
nearly $120 a month. Some companies have limits on the amount of data used,
which can be exceeded by streaming hours and hours of video. Subscribing to
several streaming services also can run up the bill.
"It's still pretty hard to slap together a few of
these services and get more or even the same as what you get from the cable
box," said Doug Creutz, a media analyst with Cowen & Co.
Hartstein said he pays for Netflix, Amazon Prime and Dish
Network's Sling TV, which, with his subscription for broadband Internet, costs
about $100 a month.
He has considered taking YouTube's new subscription
service Red for his children but hasn't taken the plunge.
"I've noticed things are becoming too
fractured," Hartstein said. "It's going to get to the point where
people are going to go: I'm not paying $10 a month for 10 stand-alone apps. I
mean, you may as well just go back to cable."
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