Basically, people will move toward the communications/entertainment device that is easiest to use and probably the least expensive. And fitting into both of those categories are services like Netflix, Amazon, Hulu and a few others.
They’re growing, which is more than you can say about other transactional ways to get video. Those have declined since 2012, according to Glenn Hower, a research analyst for Parks Associates.
Writing in Fierce Cable, he noted: “The only segment that displays a notable average spending increase is Internet-based subscription video on-demand (SVOD), which has increased from $3.71 per month in 2012 to $6.19 per month as of 2015. This increase is not surprising, since the typical price point for a subscription service is $7-10.
"The concern for content providers is that revenues from transactional services are more lucrative than low-margin SVOD revenues, leading to a disconnect in value proposition between content providers and consumers.”
Netflix is pretty alluring and a good value for the money. And it’s easy.
That’s important. Using a DVR, I’d guess, is about as easy as technology gets, but DVR penetration got to about 50% a few years ago and has gotten stuck there. Instead, consumers have preferred to subscribe to Internet-based services, where they can pick up on episodes they missed, or entire seasons, rather than having to pay attention to DVRing favorite shows, as incredibly simple as the process is.
So while the technology is easy, it’s the thinking that’s become the problem.
“The younger people who were the first people to adapt to time-shifted viewing are now moving their time-shifted viewing” CBS chief research officer David Poltrack told IndieWire’s Michael Schneider earlier this year. “They became less dependent on their DVR. While the penetration has plateaued, if you look, the increase in actual DVR playback itself was smaller and smaller every year.”
What the success of OTT services mask somewhat is that altogether, the buck spent on entertainment is not zooming ahead. In fact, Hower wrote, if you exclude Internet-delivered SVOD service “Households spend an average of less than $1 per month buying and renting digital video.” He calculates that “the industry is selling, on average, less than one movie per year to each household and renting between one and four movies to each household per year (assuming $15-20 for a purchase and $3-6 for a rental).”
Nothing about that seems particularly startling until you back up. Then you realize how much, and how quickly, the streaming biz is charging ahead.
Last year, Netflix said that in 2016 it would double its production of originals from the season before, from 15 to 30. Last month, it announced it would double up again, from 30 to 60, in 2017 and spend $6 billion to do so.
Amazon is now expanding worldwide, too. Other OTT services are springing up all over. In a world of diminishing astonishment for what’s new, that growth hardly raises an eyebrow.
But it’s changing everything.