Streaming is all the rage these days, so much so that it has the potential to overturn a business model that has worked well — and has been profitable — for 70 years. And there’s no guarantee that it will even succeed! As such, it is important to know the past and (possible) future of this evolution that’s turning into a revolution.

The first lesson learned thus far is that “streaming” is an Internet technology that comes in at least four different forms: SVoD, TVoD, AVoD, and online pay-TV. As explained by Brett L. Sappington, senior research director and principal analyst at research company Parks Associates in Addison, Texas, “Though they are [all] OTT video services, we do find distinct differences in business model, use case, position in the consumer portfolio, direct competition, viewing habits, and other factors.”

The second lesson is that traditional television is only “dying” in the minds of the investors on Wall Street — not in the heads of those on “Main Street.” Indeed, traditional television is more vibrant now than it ever was, with U.S. advertising revenue and international program sales continuing to grow. What is changing, however, is the form of TV content distribution (on broadband) and fruition (how it’s watched). Vintage TV series, such as All in the Family (1971) and Seinfeld (1989), are more popular today than they ever were before, especially with young people. The difference is that today’s viewers have multiple options as to where to watch them: on TV sets, on computers, and on mobile phones or tablets.

Which brings us to the third lesson learned: Everything is cyclical. Television started its content distribution with over-the-air frequencies. Then it moved over cable. Later, it added physical media (cassettes, DVDs, etc.). And now, it’s going back to be carried via frequencies again (broadband).

The TV screens themselves have evolved, too, in the sense that they are now flat. The fruition of IP rights, on the other hand, has devolved — from over 80 rights just a few short years ago to one right that encompasses all rights. After all, everything is cyclical.

Moving along with the lessons learned, it must be noted that, with some 37 major U.S. streaming services (see chart to the right that lists all but the five major sports streaming services: ESPN Plus, WWE Network, MLB.TV, NHL.TV, and DAZN), competition is going to be fierce, and most consumers are expected to subscribe to an average of just three of these services.

For example, subscriptions to the upcoming Disney Plus will likely be siphoned off of Netflix’s base (since it’s the largest such service). The Disney Plus bundle (which includes ESPN and Hulu) will cost $12.99 a month, the same price as Netflix’s and Amazon’s standard plans. Disney Plus on its own will cost $6.99 a month.

However, the most popular service is anticipated to be the ad-supported AVoD because it is being given away virtually for free, even though not all AVoD services are for free (e.g., Hulu). Plus, not even “purely free” AVoDs (e.g., Amazon’s Freedive) are really free because in order to access the service, consumers need to pay for broadband.

In addition, cable operators will require consumers to subscribe to their cable and/or video services in order to access their “free” AVoD. In effect, a typical household that subscribes to just one OTT service (which represents 40 percent of SVoD subscribers) will have to pay for broadband no matter what. Research shows that, in general, consumers are not going to spend more than $38 a month for SVoD services, in addition to broadband costs.

A good free AVoD service is also expected to drive consumers to its company’s related SVoD. The advantage of AVoD is that the service skews high among men (60 percent) and younger across other demographics (44 percent among 18-34-year-olds).

In terms of who will ultimately come out on top of the subscription (SVoD) game, the winner(s) will have to take advantage of several features, including:

1) Quality and quantity of their original content.

2) Their high-speed pipes.

3) Their brand recognition.

4) Their low cost to consumers.

5) An efficient credit card collection system.

6) Ease of navigating their interface.

7) Multiple monetization windows (e.g., TVoD, SVoD, AVoD).

Currently — and coming soon — there are SVoD services with brand recognition and quality content (such as Disney Plus), but without their own broadband pipes; services with both content and broadband (NBCUniversal/Comcast, Warner Bros./AT&T); and services that need both broadband and content (Netflix, Amazon).

Today’s studies are trying to predict the future path that OTT will take. However, like a hurricane, the path could change at any point in time. Data from an Axios/Harris poll shows that consumers across all ages are more than 30 percent more likely to cancel a subscription streaming service after the series they are watching has ended.

Specifically, it found that 16 percent of HBO subscribers planned to cancel their subscriptions after the Game of Thrones finale.

In terms of demographics, the study found that 50 percent of Generation Z-ers intended to cancel a subscription after watching a particular show. This percentage gets lower with older generations, with Millennials reaching 45 percent, Gen X-ers hitting 36 percentage, and Boomers at 32 percent.

On top of that, many consumers only plan to keep subscription services for less than six months.

It has also been pointed out that SVoD churn is much easier than traditional cable TV, where the cable box has to be returned.

What various studies are not showing is a typical experience that a viewer faces when using a TV set with multiple apps connected to broadband. In a Los Angeles hotel, this reporter was able to connect to a local TV station (for the local news) only through Viacom’s Pluto TV, and only after surfing through dozens of apps.

Negative experiences with SVoD also include the time-consuming search for something appealing. After a while, most viewers get frustrated and simply turn the TV off.

(By Dom Serafini)

Audio Version (a DV Works service)

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