How the dream of cheap streaming television became a pricey, complicated mess
BURBANK, California: The dream of cutting the cord on pricey cable TV services went something like this: Consumers could get what they wanted, when they wanted, while saving money because they wouldn’t being paying for expensive bundles of channels they never watched. Snip, save, enjoy. But this entertainment nirvana never actually arrived. First came pricey broadband services required to stream Internet video, often delivered by the same cable wires consumers longed to cut. Then came a proliferation of services - offered by Netflix, Amazon, Hulu plus and more - each with a bill of its own. Then came more boxes, wires and remotes.
And finally came the question: How exactly do I get my Star Wars fix?
The answer, it became clear with an announcement here at Disney’s Southern California headquarters Thursday night, is that most consumers eventually will need yet another service to stream many of the staples of American entertainment: ‘Frozen’ ‘ The Avengers’ and, yes, all those Star Wars sequels, prequels and spinoffs.
While many of these favourites will remain available on other services for a time, gradually Disney will pull them into its own service, Disney+. The cost: US$ 6.99 a month.
“If cord cutters thought there was some way they were going to evade the tyranny of annual price increases, they were deluding themselves,” said industry analyst Craig Moffett of MoffettNathanson. “Every economist in the world tried to warn that the outcome of that system would be higher prices
If cord cutters thought there was some way they were going to evade the tyranny of annual price increases, they were deluding themselves. Every economist in the world tried to warn that the outcome of that system would be higher prices and less choice. And lo and behold, that’s where we landed.
and less choice. And lo and behold, that’s where we landed.”
Those who study the entertainment industry debate the underlying reasons for this. One group blames the industry’s biggest players for reasserting their control over pricing in a way that disadvantages consumers - and Washington for allowing that to happen. Streaming services are the profitable beneficiaries of these shifts, while consumers’ wallets are the losers.
The other side, including Moffett, says the outcome was inevitable for a range of predictable reasons: Americans want the best, coolest shows, and these cost a lot of money in actors, set costs, big-name directors and special effects. Even for a television show, these expenses can run into the millions of dollars per episode.
But there is no real debate about the outcome: The dreams of cord cutters are largely unfulfilled. A transition that some hoped would provide more choice, lower prices and more simplicity instead has delivered frustrating levels of complexity. There still may be more choice, but each choice comes with price tags that, taken together, may well approach the cable bills of old.
“It’s not going to come for free,” said Michael Powell, president of trade group NCTA, representing pay television and broadband providers. “People want to watch their ‘ True Detective,’ ‘Breaking Bad,’ ‘ Mad Men,’ and that stuff costs a fortune.”
The shift is visible in the falling number of traditional cable video subscribers and the rising numbers of broadband subscribers. The two lines crossed a few years ago, according to data compiled by S& P Global Market Intelligence. Broadband customers are more profitable for cable companies, too - because they don’t have to share those monthly fees with the media companies providing the shows.
In other words, as television consumers pared back on cable packages, they spent more on internet. This hurt satellite television companies, but relatively few actual cords got cut. And many of those that got cut were replaced by new cords from other companies, with bills of their own, not to mention the ones from streaming services that delivered the actual shows, movies and sporting events.
“Paying five different streaming services a total of 50 or 60 dollars to get some of we want instead of a little more to get a lot of what we want - well, I think a lot of people would prefer the package deal,” said Atlas Media founder Bruce David Klein, a veteran television producer and cable expert. “It’s getting harder to piece all this together in a way that doesn’t cost a fortune.”
Disney officials said their service would offer advantages viewers can’t get anywhere else.
“Never before has our content been as broadly, conveniently or permanently available as it is on Disney+,” said Disney executive Kevin Mayer while standing on the studio’s lot. “We’re confident consumers will love the service.”
Company officials portrayed Disney+ as particularly attractive to consumers craving simplicity. Rather than the thousands of scattershot shows and movies on Netflix, Disney executives said they would offer a streamlined set of offerings from their popular content brands including Marvel, Pixar, and LucasFilms.
Investors seemed pleased - Disney stock closed up 11 per cent Friday.
But Tim Wu, author of “The Attention Merchants,” argues that Disney’s announcement and other recent developments signal that a halcyon era is ending, one in which disruption in the entertainment industry unleashed opportunities for better consumer deals.
The deals came for those willing to cancel their cable services while being careful in adding new streaming services. Such restraint has gotten harder as the industry has fractured, with many entities, including sports leagues and genre-focused producers, now offering their own packages.
“Everything is about funding, a way to make people pay more money,” Wu said. “The incentives are to have streaming be as bad a deal as cable already was.”
Streaming began as the domain of the digital-minded Netflix and soon attracted a slew of entrants. Legacy companies, frustrated that Netflix was growing its influence on the backs of their shows, made plans to take back rights and launch competitors.
Craig Moffet, industry analyst of MoffettNathanson