Moves by Dis­ney and CBS are milestones in stream­ing’s long march to con­quer ca­ble

The Globe and Mail (Prairie Edition) - - REPORT ON BUSINESS - PETER NOWAK A Toronto-based tech­nol­ogy jour­nal­ist and au­thor

Is stream­ing the new ca­ble? The ques­tion is top of mind af­ter big an­nounce­ments this week by Dis­ney and CBS.

Dis­ney says it will launch a new ser­vice in the United States in 2019 as the ex­clu­sive stream­ing home of its pop­u­lar prop­er­ties, which in­clude Pixar, Star Wars and Marvel su­per­heroes. The com­pany is also launch­ing an ESPN sports stream­ing ser­vice next year. CBS, mean­while, is plan­ning an in­ter­na­tional ex­pan­sion of its U.S.-only All Ac­cess ser­vice, start­ing with Canada next year. It too will of­fer ex­clu­sive ac­cess to the likes of Star Trek: Dis­cov­ery, The Big Bang The­ory and Survivor, where and when those shows aren’t al­ready li­censed to other stream­ing ser­vices.

The news comes just weeks af­ter Lon­don-based Dazn an­nounced its ex­pan­sion to Canada, its fifth coun­try. The $20-amonth ser­vice, which in­cludes NFL foot­ball and UEFA soc­cer games, is now avail­able.

With such op­tions join­ing Net­flix, Ama­zon Prime Video, BCE-owned CraveTV and oth­ers in of­fer­ing ex­clu­sive con­tent that can’t be had else­where, some con­sumers are con­cerned that his­tory is re­peat­ing it­self. With price tags typ­i­cally $10 to $20 each, sub­scrib­ing to all these ser­vices could add up to a monthly bill equal to or even ex­ceed­ing the cost of ca­ble. (In­deed, Net­flix Canada an­nounced on Thurs­day it would be in­creas­ing both its ba­sic and stan­dard monthly sub­scrip­tion rates by a dol­lar. The higher-end 4K plan is go­ing up $2).

Higher monthly bills, and more con­tent be­ing re­stricted to sub­scribers of the var­i­ous ser­vices, could pro­voke a revival of piracy. Net­flix is, af­ter all, widely cred­ited with hav­ing re­duced il­le­gal file­shar­ing by mak­ing a large li­brary of con­tent eas­ily avail­able at a rea­son­able price.

Some com­menters on­line are al­ready promis­ing a re­turn to BitTor­rent and other file-shar­ing tools, and it’s not as if piracy has been stamped out al­to­gether. About 7 per cent of Cana­dian house­holds, for ex­am­ple, use An­droid set-top boxes that can ac­cess pi­rated ca­ble con­tent, ac­cord­ing to net­work­ing com­pany Sand­vine. Both con­cerns have merit, but the pro­lif­er­a­tion of le­git­i­mate ser­vices means stream­ing is un­like ca­ble – and that his­tory isn’t re­peat­ing – in sev­eral key ways.

The main dif­fer­ence is that there are many op­tions avail­able – and they are all vol­un­tary. Un­like ca­ble, con­sumers only need to sub­scribe to the ser­vices that of­fer the con­tent they want. They don’t have to pay for chan- nels they have no in­ter­est in, which is the model that tra­di­tional ca­ble tele­vi­sion is built on. It’s un­likely that many house­holds will sign up for ev­ery op­tion avail­able.

Stream­ing ser­vices are also easy to sign up for and can­cel. There is no in­stal­la­tion, hard­ware ren­tal or 12-month con­tracts. An ac­count and credit card is all that’s needed. The likely out­come is that many house­holds will bounce be­tween stream­ing ser­vices. They may sub­scribe to one or two for a few months, then can­cel and move on to oth­ers once all the ap­peal­ing con­tent has been binge-watched.

U.S. fig­ures sup­port this like­li­hood. An es­ti­mated 53 per cent of Amer­i­cans will sub­scribe to at least two stream­ing ser­vices by 2018, ac­cord­ing to anal­y­sis firm Ac­ti­vate. That num­ber will climb to a to­tal of 62 per cent by 2020, with 43 per cent opt­ing for two ser­vices and only 19 per cent choos­ing three or more.

Net­flix will form the foun­da­tion of those bun­dles, Ac­ti­vate says, with Ama­zon and Hulu – cur­rently avail­able only in the United States – fol­low­ing suit. Rel­a­tive late­com­ers such as CBS and Dis­ney will face an up­hill climb in bat­tling their way into that top three.

The sit­u­a­tion is likely to be the same in Canada. “This won't be the first time Johnny-come-lately [op­tions] in an emerg­ing [mar­ket] may be dis­ap­pointed,” So­lu­tions Re­search Group pres­i­dent Kaan Yigit says. “I am pre­dict­ing one to two bigs per mar­ket and [the] rest niche.”

That’s not to say that each ser­vice won’t be suc­cess­ful in its own right. CBS, for one, ex­pects to have four mil­lion All Ac­cess sub­scribers by the end of this year, which is ev­i­dently enough to fuel the com­pany’s con­fi­dence for an in­ter­na­tional ex­pan­sion. But each will have to deal with cus­tomer turnover, a met­ric known as churn.

Churn is al­ready an issue for stream­ing com­pa­nies, with an es­ti­mated 19 per cent of U.S. broad­band house­holds can­celling a ser­vice last year, ac­cord­ing to anal­y­sis firm Parks As­so­ciates. For at least the newer ones, and prob­a­bly ex­ist­ing ser­vices, in­creas­ing churn is go­ing to be a chal­lenge.

So far, Net­flix, Ama­zon and the rest have been en­tic­ing sub­scribers to stay with slick apps and new fea­tures such as the abil­ity to down­load shows and movies for watch­ing off­line with­out an In­ter­net con­nec­tion. Such in­no­va­tions and ad­di­tions will con­tinue given the level of com­pe­ti­tion.

So are rel­a­tively low prices. With so many op­tions so eas­ily avail­able and so easy to can­cel, it’s hard to en­vi­sion any of the stream­ing ser­vices en­gag­ing in egre­gious, an­nual price hikes.

In other words, the sit­u­a­tion is the com­plete op­po­site of ca­ble.

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