Commentary
'Broadcast Model' For Premium Streamers Returns -- In Certain Global Markets?
- by Wayne Friedman , Staff Writer, July 19, 2023
Netflix might consider such a move, recommends one analyst.
Richard Greenfield, partner/media analyst of LightShed Partners, wonders about a marketplace moving more toward a subscription-free, advertising-supported platform for premium streaming services. Perhaps Netflix -- the cash-flow-positive premium streamer -- might have a go at it.
Greenfield cites the India-based premium streamer, JioCinema (owned by Viacom18) besting the Disney-owned Hotstar with its offering of a free access/ad-supported option.
He says that for Netflix, offering a free, ad-supported tier option might work in India. Perhaps testing this first in Germany or Japan might be a consideration.
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This should not come entirely as a surprise -- at least directionally. Late in 2021, Netflix announced a major price cut in India. Then Disney+Hotstar followed with its own big price decline.
For Disney+ Hotstar this is still a work in progress. It continues to see lower ARPU (average month revenue per user) in India from weak subscription fees as well as lower per subscriber advertising revenue. For its most recent quarter -- ARPU sank 20% to very weak $0.59.
In the U.S., getting near the broadcast model for a premium streamer has only been for the brave.
Peacock launched this way -- offering a free subscription/ad-supported option with limited content. This came with former NBCUniversal executive Steve Burke touting the launch, with the free option, which was, in effect, a “broadcast” model.
NBCU wasn't offering the free option as a money maker. Rather it could seen as a tease -- a marketing tool for users to step up and pay a subscription fee for more content via an ad-supported Peacock Premium or the ad-free, Peacock Premium+.But in February of this year, NBCU abandoned the free tier. Ongoing billion-dollar yearly losses for NBCU's entire Peacock operation pushed it to cut losses for its most basic tier. NBCU is now stepping on the gas.
This week, Peacock Premium will now be $5.99 monthly (up from $4.99; Peacock Premium+, now $11.99 (an increase from $9.99).
The so-called FAST (Free Advertising Supported Television) streaming services -- filed with lots of library product -- have gotten a jump start on all things free.
Long-term, premium streamers (with original content) need to recognize somewhat stagnant consumer financial resources. In the near term, India could be a test.
Could Netflix be looking to go the next big step -- in a country of over a 1.4 billion people?
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
Wayne, the broadcast TV networks never made anything close to the profit margins attained by large market TV stations or---once penetration reached high levels----most cable channels. Indeed, by the 1990s the three major broadcast TV networks were down to a collectivge pre-tax profit margin of about zero and were funded exclusively by their very profitable O&O stations as well as their cable channels. So, recognizing that the traditional business model---based 100% on ad revenue---- no longer worked--the networks---via their stations and affiliates ---secured retransmission fees from the cable systems and satellite distributors and became modestly profitable---as they had been in the 1950s-1970s.
The problem with the many FASTs that are springing up is that they don't earn either subscriber or retransmission incomes and rely exclusively on the ancient TV business model which no longer works. There simply isn't enough viewing nor ad revenue to support most FASTs and make them profitable operations. The average person spends about 4-4.2 hours per day with ad supported TV---linear and/or CTV---but only one of these hours is probably devoted to FASTs. While this figure will rise the "non premium" quality of most FAST program content---which is like a typical independent station's menu in the 1980s ---is not likely to cause a mass migration to this kind of service as some keep predicting.