Commentary
Streaming Entertainment: There May Be A Financial Cap For Consumers
- by Wayne Friedman , Staff Writer, November 14, 2019
We speak of DVDs, Blu-ray discs and even videotape.
In 2005 -- the entire home video market, comprised mostly of physical video products, DVDs, Blu-Ray discs, and other sales --- was around $25 billion. The bulk of this being $16 billion in DVD sales alone.
What’s the entire home video market now in 2019? Also, $25 billion. DVD sales have dropped to $2.2 billion, with total annual streaming services now at $15 billion annually.
This may sound crazy. But, for some analysts, streaming may have already peaked. “Now the question is: Is $25 billion just the natural cap?” asks Bruce Nash, founder and president of Nash Information Services, in speaking with CNBC.
advertisement
advertisement
With new services coming on board -- Apple TV+, Disney+, NBCU’s Peacock, and HBO Max -- this \ doesn't seem to make sense.
But think about this: Two of those services -- Apple TV+ and Disney+ -- are starting out at a modest $4.99 and $6.99 price tag, respectively -- perhaps a super-discounted price. Next year, there has been talk that NBCU’s Peacock may be cheaper. Like free. (OK, HBO Max might just ruin this far-fetched analysis with its $16 a month price tag.)
Analyzing a $4.99 or $6.99 price tag may tell more. In 2005, that might have been the average price for a single purchase, perhaps rental, of a movie.
No doubt there are plenty of estimates that the new TV-video streaming businesses will expand consumers' total monthly entertainment dollars. But by how much?
If consumers are paying $80 to $120 a month for total home TV entertainment -- on-demand, streaming, traditional pay TV providers, individual movie/TV subscriptions -- do we really think this number will rise 10%, 25%, or 100% over current levels?
How much much more can consumers pay for entertainment per month?
Traditional media companies continued to worry about how to push new streaming services, while maintaining legacy pay TV distribution revenues -- a business that will continue to dominate their financial quarterly earnings reports for years to come.
Cord-cutting isn’t just the name of a trend. In years to come, that activity will need a new definition/name -- especially if it increases 5% or 10% or more a year. Cord-slashing? Cord-crashing? Maybe that will get legacy media’s attention.
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
The answer to your question, Wayne, is that many consumers will simply have no choice but to pay a lot more if they wish to get a wide variety of content for various members of their families---not just themselves.
The key point is that for many consumers this becomes a household, not just an individual decision. The husband may want weather, news and sports content, plus war and scifi movies and documentaries; the wife may want health, talk or cooking shows as well as various types of comedies, certain reality fare, etc. He may favor the Fox News Channel but she likes MSNBC---and both want CNN. And there are others---kids and teens---in many homes who may have their own requests and needs. Also, as competition in the SVOD battlefield heats up with many of the surviving players straining to attain their subscription and profit goals, pricing will rise and hybrid business plans---including lower cost ad-supported options---- will, no doubt, proliferate.Also, many services will introduce firm annual ---or longer duration---contracts, in exchange for rate discounts---which will induce people to buy them if the "deal" seems OK. So, yep. I see the average SVOD consumer opting for 4-5 SVOD services in the near future and paying considerably more for that then the current figure which is around $35-40 per month., plus many of these homes---perhaps half---will continue with "pay TV". How long it will be before all of this materializes and what happens next, remains to be seen. We are really in the second inning of a nine inning ball game.
Agree with Ed on many points, kids as resident lobbyists is key factor. In higher income SMAs price less of a problem. Really wonder how HBO Max came up with that price point?
But, there will be family streaming budget reviews and video value propositions will face scrutiny.