Great Streaming War is ramping up in 2018
Online subscription services have disrupted entertainment, and they’re only getting started
“If you like it, don’t forget to subscribe!”
That’s not just the closing mantra of every YouTube video — it is one of the defining ideas of the entertainment industry right now.
This is the age of the subscription, in which Netflix and Spotify are just the beginning. Just as more people are cutting their television cable, for instance, in comes Netflix, Crave, TMN Go, Amazon Prime, CBS All Access and other streaming services to scoop up the money we thought we’d saved.
Even Disney plans to get in on the action next year, with exclusive content from its Star Wars, Pixar and Marvel brands.
The same is happening with movies, music, video games, audiobooks, comic books, magazines and more.
The subscription model — one of the oldest business models, we might add — has now moved past the stage of technological disruption for its own sake.
But how sustainable is it? Not all, or even most, of the entertainment companies competing in the streaming space will thrive.
Even a giant like Spotify has struggled to earn a profit. And in the last month, Netflix’s stock has stumbled as it missed its subscriber growth targets.
And more competitors are on the way. Walmart is reportedly starting its own video service to compete with Amazon and Netflix, with a plan to offer a cheaper subscription than ones that are already out there.
Apple is now branching well beyond music, commissioning huge Hollywood stars and production companies to produce original video content, despite not yet having a real home to stream these shows. The company also recently bought Texture, the digital magazine subscription service, and there is speculation that Apple will eventually bundle all of its offerings into a single online subscription plan.
That’s similar to what DC Comics just announced, with a plan to bundle new TV series, like the upcoming Titans, animated series and comics together into a one-stop service under the DC Universe banner.
But even the most successful operate under heavy cost structures. Netflix has made a big bet on original content, and despite being recognized as the world leader, being in over 160 countries with over100 million subscribers, reported in 2017 that it had $4.8 billion (all figures U.S.) in total gross debt and had $15.7 billion in streaming content obligations. Spotify has reportedly paid $9.76 billion to the music industry since 2006. The streaming service just had a successful modified IPO, which put its valuation at $26.6 billion, but many critics have pointed out that the bigger it gets so grows its costs as it has to pay the labels, so a path to profitability could be difficult.
Moviepass — a subscription service for movie tickets — is an interesting case study that shows the strengths and pitfalls of subscription schemes.
The company initially launched in 2011, and tried a number of different pricing approaches, but didn’t make much of a splash. Until, that is, last year, when Moviepass was purchased by a data company, and slashed its one-movie-aday pricing plan to a mere $9.99 a month. Membership exploded, up to a reported 3 million users. The problem was the company was paying full ticket price to the theatres for every ticket used, and so it reportedly lost $40 million in May this year. Earlier this month, the company filed to sell up to $1.2 billion in equity in order to stay solvent.
Moviepass is not available in Canada, but Sinemia is. Started in Europe, the big difference is that rather than an all-you-canwatch offering, it offers several tiered pricing plans, with options for couple and families, which allows for a certain number of movie tickets to the theatre per month.
For instance, for $9.99, users can watch two movies a month — a far cry from the 30 movies a month Moviepass users can enjoy.
“When Moviepass launched the $9.99 plan, a lot of the members asked me if we are going to match, and looking at the math in multiple countries, I just can’t make that work,” said Rifat Oguz, founder and CEO of Sinemia. “But … we are still growing over 50 per cent month over month. Why? Because we are giving more flexible options based on the customer.”
While Moviepass limits viewers to standard theatres, and has introduced surge pricing for prime-time slots, Sinemia offers advanced ticket buying and a full range of theatre experiences, including 3D and IMAX. Oguz says the company doesn’t have any deals with Canadian theatres — although one day they could — and pays full price for the seats, but says the costs are covered from other areas.
“We don’t lose tons of dollars per member, because not everyone is going two times a month,” he says.
“I am going to pay more because it’s going to be full ticket price. Of course, (the tickets) cost us more than what they pay, but we are covering that cost from advertising revenues that we are getting from studios to show and advertise their movies on our first screen (the app). I’m going to get the money from the bigger economy I’m going to create. Since people are going to movies they are going to eat out and maybe buy some merchandise. We want to be a part of every part of movie night. Like we can Uber you to the theatre in every country, through the integration within our app. That’s how we look at it, as an end-to-end movie-going experience.”
Oguz points to advertising opportunities with the studios to help push films to his obviously movie-loving audience, and points to deals like its partnership with Restaurants.com in the U.S., which he says they are working very hard to replicate in Canada.
“We love Canada right now. Since we launched there, Canada is the highest growth country, it has skyrocketed,” says Oguz. “We have the highest growth percentage, month over month, and we don’t have a marketing budget, it’s all word of mouth.”
As for what’s next, more services are likely going to look into partnering and bundling with others, or offering more than just a single product. DC Universe — which will not be available in Canada — is a good example, combining the superhero creator’s comics and video offerings through online service. Apple is rumoured to do something similar — one streaming productthat bundles music, TV and news with a single subscription.
But the biggest thing is for many of these services to find a way to stay relevant and valuable to users, who are liable to look for deals or exploit free trials until they run out.