Legacy Media Cos. Wrestle With OTT Rivals

• by Wayne Friedman , Staff Writer, January 31, 2019

Netflix has no worries. But the bigger picture? The total TV ecosystem may include just four major content elements.

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.