Commentary
Legacy Media Cos. Wrestle With OTT Rivals
- by Wayne Friedman , Staff Writer, January 31, 2019
A recent survey showed consumers are willing to pay between $10 and $16 a month for a streaming TV-movie service with no advertising. All this is in the range of Netflix’s recent announcement to raise monthly rates across the board.
PQ Media says consumers spend an average of $1,344.55 per person each year on video media, around $113 a month -- which may include OTT and ad-supported, traditional pay TV.
Total spending for U.S. consumers is expected to rise 3.3% this year.
But what do consumers want to spend? That can be fuzzy at best. Some research says it's an estimated $50 to $75 a month.
All this rubs up against aging, legacy TV networks -- especially when it comes to now regular 2% to 3% losses per year in traditional TV subscribers.
So networks are heading to the OTT world -- as if it will be a savior.
Just think about Hulu -- one of the oldest digital video platforms currently in the market, which has a non-advertising subscription service, as well as limited advertising. It has net losses of more than $1 billion a year. (At the same time, Hulu pulls in about $1 billion a year in advertising.)
Most don’t know who will be the winners. Except apparently this guy: Steven Cahall, senior analyst, RBC Capital Markets.
At the recent NATPE conference, he said: “If you don’t work for the four global direct-to-consumer companies — Netflix, Amazon, Disney and Apple — you need to figure out how you fit into a world where they are becoming more dominant.”
NBCUniversal, WarnerMedia, Fox, Discovery? Seems there are only room for four — at a total of anywhere from $50 to $60 per month or so. Consumers won’t keep on spending up to $150/month for TV.
Last summer, virtual pay TV provider “skinny bundle” DirecTV Now raised prices by $5 to $40 for its base package. The result? In the fourth quarter of 2018, it lost a massive 267,000 subscribers vs. gains of 63,000 in the previous quarter.
What does that tell you? Your great and crappy TV shows and platforms have a price.
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
Wayne, "Netflix has no worries" seems to be a bold statement.
Aren't they carrying ~$20b in debt, and recently went to the market for a further $2b of debt? I also note that Bernstein include NLFX in its 'low-quality' stocks assessment.
But John, don't you realize that Netflix has, almost single handedly, destroyed "linear TV".Nobody, except worthless oldsters, watches "TV" anymore. Netflix is invincible. All of its earstwhile competitors are doomed to failure. Seems to me that I recall exactly the same words being said about the ABC, CBS and NBC TV networks about 40 years ago---and we all know how that worked out.
It will be interesting to see how long Netflix delays the introduction of a lower sub priced ad-supported offer. Now is probably the right time---but will they grasp the opportunity while the pickings are ripe ---or wiat until they are whittled down by hordes of SVOD/OTT rivals? Stay tuned.