Recent headlines have covered cord cutting as if it is an inevitable trend, set to doom the TV industry as we know it. However, when we peel back the layers of the alarmist headlines, the argument doesn’t really hold: No streaming service yet offers all that consumers want, as my colleague Kris Arcand found in discussions with our ConsumerVoices market research online community (MROC).
One noteworthy comment from a ConsumerVoices member:
If the service is guaranteed to work, and would include everything that is on cable and dish I would consider it. I would rather stream everything because you can do it on more devices than regular cable. Streaming is usually more affordable than traditional cable. – Female, 35-44
In other words: “I want what I currently get from my TV provider, and I want to be able to watch on all my devices. Oh yeah, I’d like it to be cheaper, too.”
Not an attitude that spells doom for pay TV providers any time soon.
Let’s break it down. First, pretty much all cable and satellite have apps that allow you to watch on all your devices, though awareness and adoption may be lagging. The perception that over-the-top (OTT) is cheaper is also an illusion. The Federal Communications Commission (FCC) reports that the average expanded basic cable package includes 181 channels for $69.03 per month. The closest streaming offering is DirecTV Now’s Go Big package with “120+” channels for $70 per month, and they still don’t offer all local stations in all markets. OTT services like Sling TV or PlayStation Vue offer bundles in the $20 to $50 per month range, largely because their channel bundles are skinnier. But then the consumer will likely add other bundles of news, sports, or entertainment channels at $5 to $10 per month each to get their most-watched channels. And to get current season shows, they will need Hulu for another $6 to $12 per month. Even without Netflix or Amazon, the monthly bill is back in the $50 to $60 range. File that under subscription fatigue.
Not to mention consumers are wary that today’s lower costs are too good to be true, such as this ConsumerVoices member who predicts streaming “will get more expensive, with content spread across so many services that you can’t see what you want without subscribing.” Consumers have gotten wise to the trend of free subscriptions that suddenly start charging for worthwhile content or services, à la Evernote. Consumers are similarly wise to the fact that another competitor is likely just around the corner with another free, good enough option, impeding the surrender to payment.
Finally, consumers get that cutting the TV cord doesn’t really give them freedom when they have little choice of their broadband provider, as this member notes: “Streaming will get better, but cable companies having data caps will be a bigger issue as more people stream more.” – Male, 45-54
Is the cozy world of pay TV monopolies over? Yes. Are these companies dinosaurs, destined to become extinct? No. Will streaming services look for new ways to offer all the channels and services that traditional pay TV providers do? Yes. What we’re beginning to see are families of services, with offspring that inherit the best traits of both parents:
- More pay TV providers expand their family as DirecTV did with a streaming offering, such as Comcast’s Xfinity Instant TV service
- More OTT services bring live TV streaming into the family. Hulu’s new Live TV service adds local stations to its archive of content, plus an upgrade to subscribe to a cloud DVR, rarity among streaming services
- Even streaming services that adopt over the air broadcast. Sling TV is offering a free digital antenna so its subscribers can pick up local channels live over the air
So the future is not whether streaming will kill the legacy pay TV providers. It is, to paraphrase Reed Hastings’ 2013 quote about the future of Netflix: can a pay TV provider become Hulu before Hulu becomes a pay TV provider?
What does this mean for marketers?
- Likely continued fragmentation of audiences across more distribution channels.
- National network buys will still be crucial foundations, but will need more and more supplementation with these multichannel video programming distributors (MVPDs) and virtual MVPD audiences to achieve desired reach.
- Marketers will need to learn new processes, including using planning and buying platforms like the Adobe Advertising Cloud and ONE by AOL. This fragmentation needs automated platforms to eliminate the laborious process of stitching together these audience fragments into a coherent plan that will deliver effective reach and frequency against a more strategic audience definition.