Welcome to the blog of Dr. Lisa Burns' Media Studies senior capstone class (3:30 pm section) at Quinnipiac University. If you're looking for the latest on media industry trends and insightful media analysis, you've come to the right place!
Saturday, January 13, 2018
Media Consolidation & Multiple Platforms Blog 1, Question 2 (Jan. 30th)
How sustainable are the business models of SVOD services like Netflix, Hulu,
Amazon Prime, and YouTube Red? Limit: 12
responses
Business models of SVOD services like Netflix, Hulu, Amazon Prime, and YouTube Red are very sustainable business. A lot of companies are joining forces to get more money from investors to keep afloat. Apple and Facebook are planning on using one billion dollars for video content this year for survival over Amazon. Amazon is investing in more growth opportunities, according to Doug Anmuth, an analyst at JP Morgan (Palmer). Amazon shares did better than all FAANG companies in 2017 (Facebook, Apple, Netflix, Alphabet). Amazon earned 604 dollars, 56% more than in 2016. Amazon will have 44% of SVOD users in 2018 (Feldman). Amazon’s revenue mix is changing and it’s going to include third party sellers, the growth in their web services and advertising; their Prime subscription and Whole Foods acquisition will also increase share prices. Amazon Prime has subscribers in 16 countries and is now focusing on India and South Korea. Anmuth states that, "Amazon is best positioned in our view, with its in-market customers, scale, strong access to data, shopping history, ability to close the loop, & leading market share in smart home speakers with Alexa/Echo." (Palmer). Hulu is the only streaming service where viewers can get popular TV shows, such as 30 Rock, How I Met Your Mother, and Living Single. Fox and NBC used Hulu, in 2007 and in 2009 Disney joined in. Television networks used Hulu as protection against, first YouTube, then Netflix, and then Pay TV did this; all three networks are trying to obtain new subscribers. Disney and Twenty First Century Fox have a majority control over Hulu, which allows them to invest in original programming. By having something popular, more people end up subscribing to it. They are hoping Handmaid’s Tale will enable them to get good talent to create shows and increase subscriptions. (Luckerson). Netflix had 128 million users this year, 6.6% more than last year, allowing Netflix to remain ahead of Amazon and Hulu (Feldman). A big advantage is that Netflix is now changing to all original content as opposed to paying for TV shows. Netflix is also investigating content that will look good on smaller screens like phones. They are also working on interactive storytelling technology, which will allow the viewers to decide what’s going to happen next. Hollywood wants to end Netflix’s remaking of entertainment because Netflix presently dominates all discussions in the industry (Luckerson). If Netflix doesn’t continue to perform, investors will question whether spending 7 billion dollars on content is sustainable because of competition from Amazon and Hulu. Although Netflix has high quality shows it remains just barely ahead of the competition (Feldman). The top spot for video viewing is still held by YouTube (Feldman). If Hulu, Amazon, and Netflix want to expand and increase their number of users they will have to continue on the paths they have formed while creating new avenues for revenue. Because of Hollywood’s beliefs, the SVOD services will be forced to continue to improve. Although adults now watch 73 minutes a day online, they still spend 4 hours a day on television (Feldman). SVOD companies will have to flip these numbers and improve upon their models to remain profitable.
Feldman, Dana. “Netflix Remains Ahead Of Amazon And Hulu With 128M Viewers Expected This Year.” Forbes, Forbes Magazine, 13 Apr. 2017, www.forbes.com/sites/danafeldman/2017/04/13/netflix-remains-ahead-of-amazon-and-hulu-with-128m-viewers-expected-this-year/#515912f0216c
Luckerson, Victor. “Hulu Is Hollywood's Last Line of Defense Against a Tech Takeover.” The Ringer, The Ringer, 12 Jan. 2018, www.theringer.com/tech/2018/1/12/16881390/hulu-netflix-amazon-ces-2018.
Palmer, Annie. “Why Amazon Could Soon Be Headed for a $1 Trillion Market Cap.” TheStreet, TheStreet, 10 Jan. 2018, www.thestreet.com/story/14445272/1/amazon-trillion-dollar-market-cap.html
Over the past few years SVOD services, such as Netflix, Hulu, HBO Go, Amazon Prime, and YouTube Red have been taking over the realm of watching content all over the world, with the ‘binge’ culture growing along with it. Due to their immediate success, the sustainability of their business models has come into question, as to whether or not they will last at this height of success on a national level. “The "subscription economy," a term coined by Tien Tzuo, refers to businesses that charge for services rather than physical products. This business model emphasizes long-term relationships with customers. Since an unhappy customer can simply unsubscribe at any point, companies must invest in real customer service and listen to client feedback. If they do it right, they can profit from recurring revenue and a loyal customer base” (Pattani). The building of strong relatinships is a stark different between the previous consuming of content method of television, where providers are just their providing what is available to the consumer. Additionally, the consumer-provider relationships is estranged by, as many have experienced, a tough get in contact method, like being on hold for hours for a question or a change in their plan.
Now, it is clear, that their business models are built to stay and be successful within today’s society. Despite, a rise in competition in the SVOD network of services, it does not weaken their spot within the industry. The challenges continue to cement the viability of their business models, as “the building out of the internet video space serves to solidify Netflix’s position — and to weaken that of the traditional cable bundle” (Udland). While, Udland specifically references Netflix here, it is more so an example of how the SVOD services should not be threatened from outside growing oppositions to their business model, such as Disney’s potential new streaming service, because the building up of SVOD services solidifies SVOD’s viability within that space and proves it is here to stay. Additionally, “Netflix has already established itself as a pillar of the entertainment industry and shows like “House of Cards” and “Stranger Things” have shown the company is a major cultural force. The company’s name has also become a verb (“Netflix and chill”), a sign that while its position might seem available to disruption, it is actually an entrenched consumer preference” (Udland). Other SVOD services also have claims to fame as well with Hulu’s “A Handmaid’s Tale”, HBO Go with “Game of Thrones”, and Amazon Prime with “Transparent”. Thus, reaffirming their already established impact on the world of consuming content that they are not dependent on other media companies to provide. Also in addition to the growing internet streaming content space, YouTube Red is also adding to the legitimacy of the SVOD business model with that venture of their own. “If there's one thing that Netflix's House of Cards, Amazon's Transparent and Hulu's drama series Emmy winner The Handmaid's Tale have shown, it's that it only takes one big hit to earn Hollywood's respect and, in many cases, a subscriber's credit card information” (Jarvey). Thus, Jarvey is showing here that in addition to the cultural popularity that SVOD’s have had, the overall hits and star power is also playing a large role in the overall viability of SVOD services. The combination of both a penetration into the overall normalcies of the American popular culture and the star/hit power these SVOD services have had thus cement its place as a both success and viable for the future business model with the world of consuming content.
Jarvey, Natalie. “YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/features/youtube-grows-up-inside-plan-take-netflix-hulu-1045443.
Pattani, Aneri. “Americans spent $420 billion in effort to stop buying things last year.” CNBC, CNBC, 1 Nov. 2016, www.cnbc.com/2016/10/31/why-spotify-netflix-and-hbo-nailed-business-model-of-the-future.html.
Udland, Myles. “Disney's new streaming service shouldn't scare Netflix.” Yahoo! Finance, Yahoo!, 10 Nov. 2017, finance.yahoo.com/news/disneys-new-streaming-service-shouldnt-scare-netflix-174745047.html.
The business models of streaming video on demand (SVOD) services like Netflix, Amazon Prime, YouTube Red, and Hulu are only destined for success. The millennial generation loves to have options and not be tied down to one kind of cable package hence the SVOD services are completely sustainable because more people are turning away from traditional cable that comes with pricey monthly bills and instead opting for low cost packages with many shows and movies. Now-a-days more people are purchasing Apple TVs that allow you to sync the television to WiFi in order to watch SVOD services. This eliminates the need for cable all together. This seems to have more of an appeal because a viewer is not tied down to a monthly package of certain channels but instead has a wide variety of shows and movies at their fingertips. Netflix has as many subscribers as cable television, which leads me to believe that it will only continue to grow and eventually surpass cable. In Sean Burch’s article from December of 2017, he writes, “Netflix added another 850,000 domestic subscribers during its last quarter, and saw its total U.S. customer base swell to more than 50 million in 2017” (Burch). This is very interesting because even while Netflix is competing with big names like Hulu and Amazon Prime, they are still adding more and more subscribers. Netflix is not the only streaming device that is seeing great success. According to O’Connell, “Hulu's total audience now stands at 54 million total unique viewers. Its library has expanded to 1,700 TV titles and more than 75,000 episodes” (O’Connell). Hulu has a diverse library whereas cable television is often full of re-runs of programs that are not interesting. Streaming services such as Hulu allow viewers to pick exactly what you want to watch at any time and watch as much as you would like, anywhere. However, the biggest challenges that streaming devices face are competing with each other. There are so many different types of SVOD platforms that it is hard to choose just which ones to subscribe to, but the low prices make it easy to subscribe to more than one. In Burch’s article “Netflix Has as Many Subscribers as Cable,” he writes, “The PWC report called it a ‘streaming explosion for all ages,’ with 63 percent of respondents between 50-59 saying they access TV on the internet — a 15 percent jump from 2016.” (Burch). Now that all ages are involved in streaming, it is not just teenagers and mid-20 year olds that are paying for these services, but also their parents and grandparents. I believe SVOD services will continue to grow as time goes on because cable channels will begin to develop their own methods of streaming. NBC will probably do the same but with only their own content. In USA Today’s ‘Talking Tech,’ Snider writes, “There are more than 200 subscription video services now – 202 as of the third quarter of 2017, according to Parks Associates – with 60 new services introduced in 2016 and so far in 2017” (Snider). From 2016 to 2017, streaming services have only continued to grow and I only see continual growth.
Works Cited: Burch, Sean. “Netflix Has as Many Subscribers as Cable TV, New Study Says.” The Wrap, 19 Dec. 2017.
O’Connell, Michael. “Hulu Subscriber Base Passes 17 Million.” The Hollywood Reporter, 9 Jan. 2018.
Snider, Mike, “Cord Cutters Can Now Pick from 200 Services, but Mostly Want the Top Four.” USA Today, Gannett Satellite Information Network, 10 Nov. 2017.
To the majority of people, purchasing a cable package and flipping through channels is too daunting of a task to bear. The population as a whole is too impatient and anxious to wait for their shows to come on television once a week. We want to watch our shows when we see fit, which is causing traditional television to dwindle. The way we consume media is changing as the use of technology soars. Streaming video on demand (SVOD) businesses are, in my opinion, one of the most popular trends, and they are completely transforming how we watch television. The success of Netflix, Hulu, Amazon Prime and YouTube Red is unprecedented. Each one of these streaming platforms is unique because, for the most part, they all have different shows/ movies, providing users with a diverse range of content. Each service buys out different shows and movies, and Netflix even creates their own original content that cannot be found anywhere else. The competition between these companies could play a role in its worldwide success. Because each streaming service is fighting for the most subscribers, the quality of content they own and produce is increasing. Netflix dominates the pool, and we see just how far and wide its impact has traveled in an article titled “Hollwood in 2018: The Old Order Ends, A New One Rises.” It says, “In the last three months, Netflix has continued to swell in size, with a market cap now at $83 billion, making it bigger than any media company besides Disney, including Time Warner” (Waxman). But companies like Hulu are not going anywhere, and are even on their way to a big come-up. In the article “Hulu is Hollywood’s Last Line of Defense Against a Tech Takeover” by Victor Luckerson, we see just how fast Hulu is growing and expanding. It says, “Hulu is uniquely positioned to become a giant in its own right, if it can keep its tenuous Hollywood alliances intact and find more shows that manage to stand out in a glut of content” (Luckerson). Streaming services give viewers the freedom to watch what they want at their leisure, making it the most desirable way to consume television. The simple fact that it is much more convenient than having a cable package is what not only keep streaming services afloat, but helps them thrive and compete against one another. These streaming services have become so popular and successful because of the quick, diverse and large amount of content that they offer. The fact that streaming services are easily accessible, its success has only grown because it appeals to people of all ages, but the most abundant of the subscribers are those in the millennial generation. An article published by Fact Tank says, “About six-in-ten of those ages 18 to 29 (61%) say the primary way they watch television now is with streaming services on the internet, compared with 31% who say they mostly watch via a cable or satellite subscription…” (Raine). I have no doubt that SVOD services will continue to flourish and expand. As they become more readily available with the Amazon Fire Stick and Smart TVs, people will continue to stream the content they watch and abandon or lessen the amount of cable television they indulge in.
WORKS CITED Rainie, Lee. “About 6 in 10 Young Adults in U.S. Primarily Use Online Streaming to Watch TV.” Pew Research Center, 13 Sept. 2017, www.pewresearch.org/fact-tank/2017/09/13/about-6-in-10-young-adults-in-u-s-primarily-use-online-streaming-to-watch-tv/.
Waxman, Sharon. Hollywood in 2018: The Old Order Ends, A New One Rises. The Wrap , www.thewrap.com/hollywood-2018-new-order-netflix-facebook-amazon-disney/.
Luckerson, Victor. “Hulu Is Hollywood's Last Line of Defense Against a Tech Takeover.” The Ringer, The Ringer, 12 Jan. 2018, www.theringer.com/tech/2018/1/12/16881390/hulu-netflix-amazon-ces-2018.
Business model SVOD services such as Netflix, Hulu, Amazon Prime, and YouTube Red are sustainable due to their constant growth in subscribers and money. With today’s technology, the possibilities are endless for SVOD services. Although Amazon does not publish the total number of Prime subscribers, it was published that in 2017 alone, Amazon gained around 95,000 global Prime subscribers and its market cap is at $604 billion. JPMorgan analyst Doug Anmuth even went as far as to state that “Amazon's outsized gains are unlikely to diminish in 2018” (Palmer). Netflix is the veteran SVOD service and even with its continuous price increases; it still managed to gain 8 million subscribers in the last few months of 2017. Netflix credits its popular original series such as Stranger Things, Orange is the New Black, and The Crown for the large increase of subscribers over such a short period of time. When asked about the 10% price increase, Netflix CEO Reed Hastings said it had "very little effect on signups and growth." Even with Disney announcing that it will be pulling its content from Netflix in August, the company is not worried, stating, "The market for entertainment time is vast and can support many successful services," (fiegerman). Although still relatively new, YouTube Red still has a long way to go before reaching the popularity that Amazon, Netflix, and Hulu currently have. YouTube Red costs $10/month but many subscribers are only using it on a trial basis and not the actual subscription. One reason for this is most likely due to the limited original content that YouTube currently has and the fact that Amazon, Netflix, and Hulu are more well known. Another reason may also be due to the fact that YouTube Red is currently only available in the U.S., Australia, New Zealand, Korea and Mexico (Mitroff & Martin). Amazon, Netflix, Hulu, and YouTube Red have also secured their success by producing original shows that can only be accessed on their streaming services. “If there's one thing that Netflix's House of Cards, Amazon's Transparent and Hulu's drama series Emmy winner The Handmaid's Tale have shown, it's that it only takes one big hit to earn Hollywood's respect and, in many cases, a subscriber's credit card information. (Jarvey). Many people have even been canceling their cable and are instead subscribed to one or two SVOD services, giving cable services a run for their money and forcing them to come up with new ways to maintain their own subscribers. Seeing as Netflix has been around for a few years as an SVOD and the company has only gained more and more subscribers, it is safe to say that SVOD services are here to stay and if anything, they will only continue to thrive.
Works Cited:
Fiegerman, S. (n.d.). Netflix adds a record 8 million subscribers. Retrieved January 28, 2018, from http://money.cnn.com/2018/01/22/technology/netflix-earnings/index.html
Jarvey, N. (2017, October 04). YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu. Retrieved January 28, 2018, from https://www.hollywoodreporter.com/features/youtube-grows-up-inside-plan-take-netflix-hulu-1045443
Mitroff Taylor Martin, S., & Martin, T. (2017, October 27). Everything you need to know about YouTube Red. Retrieved January 28, 2018, from https://www.cnet.com/how-to/youtube-red-details/
Palmer, A. (2018, January 10). Why Amazon could soon be headed for a $1 trillion market cap. Retrieved January 28, 2018, from https://www.thestreet.com/story/14445272/1/amazon-trillion-dollar-market-cap.html
With the constant decline of regular cable and television service providers among viewers, SVOD services are destined for success. These providers are able to eliminate the issues viewers have with regular television networks – cost and convenience. Services like Netflix, Hulu, Amazon Prime allow the consumer to view at their convenience and are very inexpensive compared to cable or satellite television. They have adapted to the way society has changed with our demand for content at our fingertips at all times, whenever we want it. Lately, it seems that each provider is fighting to claim the spot as the “best”. The competitiveness between these providers has been more apparent recently, with each company trying to top the next and other sites, such as Facebook and YouTube, trying to stay in the game.
Netflix, the largest SVOD provider, has around 100 million subscribers, a number that has been steadily increasing over the years, surpassing even their own expectations (Burch). However, there has been a debate about if their growth will be as steady and expectation-crushing because of their price increases. It’s also no surprise that they have been pouring most of their money into Netflix Originals, “Our investment in Netflix originals is over a quarter of our total P&L content budget in 2017 and will continue to grow” (Lynley). Because of this tremendous amount of spending for their originals, their content library is starting to go downhill. They are getting rid of shows people mainly use Netflix for and are being replaced with countless Netflix Originals. Stranger Things, Orange Is the New Black, and House of Cards are all great shows that exploded with popularity, but that doesn’t mean that every single Netflix Original is great. Netflix is starting to take a dangerous turn in terms of keeping subscribers in this already competitive market.
Hulu, now with over 17 million subscribers, has clearly been fighting to increase their subscriber count for a spot at the top (O’Connell). They added live TV and have a content library that is double the size than that of Netflix and Amazon (O’Connell). Their focus is quite different than Netflix’s. Instead of making original content, they focus on getting content from major studios. Hulu has just one in-house show, while Netflix has 13 and Amazon Prime has 12 (Goldberg). Luckerson touches on this fact of Netflix relying heavily on its originals, “More than anything, Hulu’s biggest advantage going forward is that Hollywood desperately needs to stop Netflix from remaking all of entertainment in its own image” (Luckerson). Hulu’s focus on having both content from various studios and from indie producers and access to live TV is a model that is destined for success. Another smart strategy Hulu has incorporated is picking up shows that Netflix has dropped. There is no better way to bring in annoyed Netflix subscribers who just lost access to their favorite shows. In today’s world of people wanting a wide variety of content at all times, especially in one convenient location, leads Hulu in the path for success and gives them the ability to be a sustainable business.
Overall, the sustainability of these SVOD service providers is indefinite right now. There is no evidence to point towards a decline in subscribers, at least not any time soon. More and more people every day are switching from cable/satellite to using SVOD services. The convenience and affordability of them makes it hard to pass up. The only hard part is choosing which service to get, since all of them are fighting hard to gain our subscription.
(Wasn't able to include with original post because it would have been too many characters)
Works Cited
Burch, Sean. “Netflix Has as Many Subscribers as Cable TV, New Study Says.” The Wrap, 19 Dec. 2017.
Goldberg, Lesley. “Where Streamers Get Their Original Content: Comparing Netflix, Amazon and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/news/streaming-services-get-original-tv-shows-movies-1045444.
Luckerson, Victor. “Hulu Is Hollywood's Last Line of Defense Against a Tech Takeover.” The Ringer, The Ringer, 12 Jan. 2018, www.theringer.com/tech/2018/1/12/16881390/hulu-netflix-amazon-ces-2018.
Lynley, Matthew. “Netflix Crushes Its Own Expectations for Subscription Growth Again.” TechCrunch, TechCrunch, 16 Oct. 2017, techcrunch.com/2017/10/16/netflix-crushes-its-own-expectations-for-subscription-growth-again/.
O’Connell, Michael. “Hulu Subscriber Base Passes 17 Million.” The Hollywood Reporter, 9 Jan. 2018.
As more and more Millennials and Gen Zers enter the work force and begin paying their own bills for services that they choose, one theme rings clear: “They respond to independence” and “self-direction” (Bernstein). SVOD services like Netflix, Hulu, Amazon Prime and YouTube Red give these generations an opportunity to be both independent and self direct. A subscriber to these platforms gets to choose what they watch and when. Unfortunately, not all of these video streaming services are sustainable.
Netflix has been creating original content (“Stranger Things,” “Black Mirror,” and “The Crown”) for a few years now but, not all of that content has been a good investment (Trainer). Just six months ago, Netflix had to cancel “Sense8” and “The Get Down” due to a lack of turn around. Original content can be hard to sell, especially to a generation that is known for being nostalgic. Vinyl sales went up 30% in 2015 and have continued to rise (Spratt). Maybe Netflix missed something when they stopped sending out DVDs - film strips might have been the way to go. Trainer writes, “Netflix's streaming content obligations continue to grow faster than revenue. We first warned about Netflix's alarming streaming content obligation growth in 2014. Since then, the issue has only worsened as free cash flow has fallen further.” Due to the way that Netflix operates currently, they are tying up all of their money in streaming and creating original content. It seems that if they do not relax with their original content they could go bankrupt. This video streaming platform has been in the red since 2010 when it first started increasing its library size and when competitors began to pop up. Netflix has also relied on new subscribers for money and their audience is constantly growing - this past year there was a 6.6% increase in subscribers (Feldman) - but their growth has been decreasing each year. “In comparison, Amazon will have 85.3 million viewers this year, or 44% of users. Hulu is taking up the rear with 32 million viewers, which is 16.5% of total users” (Feldman). Due to this continuous growth - even it is decreasing - there is an obvious audience for it. Each SVOD will need to make adjustments to fix their issues, like Netflix. One of the most important things for SVOD platforms to combat is still live television. “According to eMarketer, there are an approximate 2.5 viewers for each paid Netflix subscription. U.S. adults will average 73 minutes per day getting their entertainment fix online this year and a little over four hours a day watching traditional television” (Feldman). If adults are still watching more than four hours of television in comparison to just over an hour of streamed content, then maybe binging needs to be sold better. Maybe until everything is live streamed, SVOD platforms will not be completely sustainable.
Bernstein, Ruth. “Move Over Millennials -- Here Comes Gen Z.” Ad Age, 21 Jan. 2015, adage.com/article/cmo-strategy/move-millennials-gen-z/296577/.
Feldman, Dana. “Netflix Remains Ahead Of Amazon And Hulu With 128M Viewers Expected This Year.” Forbes, Forbes Magazine, 13 Apr. 2017, www.forbes.com/sites/danafeldman/2017/04/13/netflix-remains-ahead-of-amazon-and-hulu-with-128m-viewers-expected-this-year/#6a40824b216c.
Silbert, Sarah. “Here's how Hulu is finally becoming a competitive streaming service.” Fortune, 16 Oct. 2015, fortune.com/2015/10/16/hulu-is-finally-competitive/.
Spratt, Vicky. “Why Are Millennials The Most Nostalgic Generation Ever?” Debrief, Debrief, 28 Mar. 2016, thedebrief.co.uk/news/opinion/millennials-nostalgic-generation-ever/.
Trainer Long/short equity, value, research analyst, Deep ValueMarketplaceValue Investing 2.0, David . “Netflixs Costly Business Model Proves Unsustainable.” Seeking Alpha, 19 June 2017, seekingalpha.com/article/4082083-netflixs-costly-business-model-proves-unsustainable.
SVOD services such as Netflix, Hulu, Amazon Prime, and YouTube Red all have one thing in common: they are sustainable business models. But now the question is how? YouTube Red is a prime example of a sustainable business model. With its initial launch in 2005, it has only been getting more and more popular. I feel as though companies such as YouTube are constantly making, as well as keeping up with new trends so that their content and services never go out of style. In the article, YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu by Natalie Jarvey, she mentions how Morgan Spurlock, creator of Super Size Me sequel, decided to have the movie premiere on YouTube Red. Spurlock mentions how “You don't make movies to sit on a shelf and collect dust. You want them to actually be enjoyed by as many people as you can. And their plan is to make this a noisy partnership." This is what is so innovative about SVOD services such as Netflix, Hulu, Amazon Prime, and YouTube Red. Unlike your tradition movie that is in theatres temporarily until it is made for DVDs, these streaming video on demand services allow for people to watch anytime and anywhere. The point of SVOD are to provide easy and accessible services for their audiences. The article also touches upon how there has been a decline for broadcast networks since many prefer for a non-contracted cable subscription. If these services are basing off their change and growth by what their demographic wants, there really is no issue with these services dying.
In terms of other services, I used the article Where Streamers Get Their Original Content - Comparing Netflix, Amazon and Hulu by Lesley Goldberg, to see how SVOD services like Netflix, Amazon, and Hulu compared to one another. The article mentions how Netflix and Amazon have been pushing for their own original scripted content. I think this is part of their sustainable business plan. If they create content that is only shown on their service and it is actually pretty good, then that will drive more people to the service. This goes to show how these services are constantly adapting to new and innovative ways. In an article from Cleeng, BENEDICTE GUICHARD wrote an article that talks about what are key strategies SVOD use. Some strategies consisted of coupons and bundles. Hulu and Spotify currently have a bundle going on for students that if you get spotify, you will get Hulu for free as well on top of the student discount offered. Many Gen Zers and millennials are still in school so this is a perfect way to keep their subscribers coming.
Overall, these SVOD services know exactly what they are doing whether it be partnering up with another service, offering discounts and coupons. They are fully aware of what is going to keep their business going, prolonging their sustainability.
Jarvey, Natalie. “YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/features/youtube-grows-up-inside-plan-take-netflix-hulu-1045443.
Goldberg, Lesley. “Where Streamers Get Their Original Content: Comparing Netflix, Amazon and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/news/streaming-services-get-original-tv-shows-movies-1045444.
Guichard, Benedicte. “What Are The Key SVOD Revenue Strategies?” Cleeng, 7 October. 2017, https://cleeng.com/blog/key-svod-revenue-strategies/#gs._ZStPSk
SVOD services like Netflix, Hulu, Amazon Prime and YouTube Red are definitely sustainable in today’s market. More now than ever, consumers are “cutting the cord” and breaking off from the tradition model of cable. These services offer unique perks and at such a low price that even if a user subscribes to several, they will still be saving money compared to if they had a cable subscription.
As perhaps the most prominent subscription service, Netflix alone has just as many subscribers as cable, according to The Wrap. In a survey done by PricewaterhouseCoopers and reported by The Wrap, 73% of surveyed users still pay for traditional television services, such as cable or satellite. Netflix isn’t the only service cashing in on the new cord-cutting idea. Hulu is offering their limited commercials plan free with a Spotify subscription, and vice versa. Hulu is unique in that it is owned by cable companies (Fox, NBC and ABC) so it almost makes up for the DVR feature consumers lose when the officially cut the cord by allowing subscribers to watch other popular shows like This Is Us and The Bachelor the day after they air, making it even more sustainable in today’s market. Google is debuting its SVOD service, YouTube Red, with the help of big name and well-liked celebrities such as Demi Lovato, Ryan Seacrest and Ellen DeGeneres. Amazon Prime offers streaming service with its membership, with shows like The Marvelous Mrs. Maisel.
An interesting point worth noting is how most of these paid-services started without ads. Netflix doesn’t have ads, never had ads and relies solely on subscription revenue. However, at the beginning of Hulu, it had an option where viewers could watch most shows for free with ads. Then they phased that out, making an option where you could pay, but still have ads. Although it is a setback and initially makes consumers unhappy about it, chances are viewers won’t swear off Hulu forever and will keep subscribing to the unique perks of watching the newest episodes of popular shows the day after they air. To keep up with the people who just can’t give up on live television and what it offers, such as the news or sports, Hulu and other companies like DirecTV have offered a live television package that doesn’t require cable with popular channels such as HGTV, NBC, Fox and E!.
The Handmaid’s Tale just won a Golden Globe for best television Drama. The Crown’s Claire Foy won a SAG award for best female actor in a television drama. The one thing these two shows have in common is that users can’t get them with a traditional cable or satellite subscription, making SVOD services that much more appealing. The Handmaid’s Tale, The Crown and other popular shows are only available on Hulu and Netflix, respectively. SVOD services offer something traditional services don’t: original content. So if consumers want to get in on these award-winning shows and others like it, they have to subscribe to a service.
Works Cited Burch, Sean. “Netflix Has as Many Subscribers as Cable TV, New Study Says.” TheWrap, 19 Dec. 2017, www.thewrap.com/netflix-passing-cable/. Jarvey, Natalie. “YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/features/youtube-grows-up-inside-plan-take-netflix-hulu-1045443. Luckerson, Victor. “Hulu Is Hollywood's Last Line of Defense Against a Tech Takeover.” The Ringer, The Ringer, 12 Jan. 2018, www.theringer.com/tech/2018/1/12/16881390/hulu-netflix-amazon-ces-2018.
Archer, Seth. “Netflix Is Plunging as Competition in Streaming Video Heats up (NFLX).” Business Insider, Business Insider, 25 Sept. 2017, markets.businessinsider.com/news/stocks/netflix-stock-price-is-plunging-as-competition-in-streaming-video-heats-up-2017-9-1002532923.
Burch, Sean. “Netflix Has as Many Subscribers as Cable TV, New Study Says.” TheWrap, 19 Dec. 2017, www.thewrap.com/netflix-passing-cable/.
O'Connell, Michael. “Hulu Subscriber Base Passes 17 Million.” The Hollywood Reporter, 9 Jan. 2018, www.hollywoodreporter.com/news/hulu-subscriber-base-passes-17-million-1073256.
Pelts, Shirley. “Why Comcast Considers Stacking Rights as Important.” Market Realist, 8 Sept. 2016, marketrealist.com/2016/09/comcast-consider-stacking-rights-important/.
“Streamer Things: Internet-Enabled TV Connected Devices Found in Nearly 60 Percent of U.S. TV Homes.” What People Watch, Listen To and Buy, www.nielsen.com/us/en/insights/news/2017/streamer-things-internet-enabled-tv-connected-devices-found-60-percent-us-tv-homes.html.
As Netflix, Hulu, Amazon Prime, and other streaming video on demand (SVOD) services continue to get purchased by big time networks, the window for the basic cable package shrinks. With that being said, do SVOD services have strong business models? Well, it’s hard to argue they don’t as these companies are just starting to really flourish. Victoria Luckerson, of The Ringer, had this to say about Hulu; “this week the company announced it has 17 million subscribers, having gained about 5 million over the last year and a half.” The company is eleven years old and yet it’s now seeing it’s largest subscription numbers. But why? Why is Hulu all of a sudden having all this major success? It’s because times are changing and SVOD services are taking the simple cable packages place as the most desirable entertainment. The only thing keeping basic cable around is live entertainment, however as we have recently seen, these SVOD services are able to bring their viewers live entertainment as well. Natalie Jarvey and Georg Szalai of the Hollywood Reporter had this to say in their article, How Disney Will Benefit From Becoming Hulu’s Majority Owner Via It’s Fox Deal, “The Disney CEO on Thursday reiterated past comments that the company is pushing into direct-to-consumer offers more aggressively while continuing to offer its content in the traditional pay-TV ecosystem. If that ends up facing major challenges amid cord-cutting, Iger said Disney could simply adjust its strategy and "flip a switch" to focus even more on the direct-to-consumer space. Even before the deal announcement, Wall Street observers suggested there would be benefits for Disney. "Owning a second major studio [after the Fox deal] could help Disney build out its OTT platform due to launch in 2019 with more content, and owning a majority stake in Hulu would give Disney control of this SVOD service as well as a potentially large virtual bundle to help offset cable sub declines," Macquarie Capital analyst Tim Nollen said in a report published before the deal was unveiled.” This tells us that Disney plans to try and maintain cable sales along with releasing more and new content directly to the consumer/streamers. While some SVOD services have different business plans than others (for example Hulu looks to Major studios for content, while Netflix and Amazon look to own their content and scripts), they each hit the main target audience as these SVOD services have created a demand for streaming TV.
Work Cited-
Szalai, Natalie JarveyGeorg. “How Disney Will Benefit From Becoming Hulu's Majority Owner Via Its Fox Deal.” The Hollywood Reporter, 14 Dec. 2017, www.hollywoodreporter.com/news/how-disney-will-benefit-becoming-hulus-majority-owner-fox-deal-1067567.
Goldberg, Lesley. “Where Streamers Get Their Original Content: Comparing Netflix, Amazon and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/news/streaming-services-get-original-tv-shows-movies-1045444.
Luckerson, Victor. “Hulu Is Hollywood's Last Line of Defense Against a Tech Takeover.” The Ringer, The Ringer, 12 Jan. 2018, www.theringer.com/tech/2018/1/12/16881390/hulu-netflix-amazon-ces-2018.
There is a sense of nostalgia that myself, and other consumers feel when they think back to watching their favorite programs on network television. This brings back memories of the stress that was making sure you were home on time so you wouldn’t miss any important parts of the show. The annoying commercial breaks that would come just when the most anticipated part of the season was about to happen, and of course having to wait a whole week just to see what was going to happen to your favorite character next. Yes, this is still a part of a consumer’s experience but it doesn’t have to be for the majority of shows. This element of convenience is one of the reasons that SVOD services are so popular. Consumers like to binge, they like not having commercials, and they like viewing their programs whenever they want. As Pelts explains, “The convenience of accessing content anytime and anywhere has been one of the reasons that millennials are watching content online. According to the Digitalsmiths 4Q15 video trend report, about 56.5% of 3,120 consumers surveyed said they prefer over-the-top services such as Hulu for the convenience of watching content anytime” (Pelts).
It is this convenience aspect of services like Netflix, Hulu, HBOGO, and Amazon that makes the SVOD model so sustainable. The statistics prove it to be true as well. In 2017 Netflix, the most popular streaming service, added another 850,000 subscribers (Burch). Not to mention, Hulu just had a historic year increasing their subscriber base by 5 million which is a 42% increase (O’Connell).
Another telling indication of the sustainability of SVOD services are the use of internet enabled devices. A 2017 Nielsen study revealed that 58.7% of TV homes have at least one internet enabled device that can be used for SVOD. This is a 12% increase from 2016 (Nielsen). An important component of this data is, “Homes with internet enabled devices tend to be young, employed and affluent- characteristics that marketers and advertisers crave in an audience” (Nielsen). The fact that younger homes are the ones with internet enabled devices is important because it shows what future generations will be using. This means that future generations will be taught the same habits, and will be more accustomed to using SVOD services, which adds to the sustainability of the model.
The real threat to SVOD is the competition between different subscription services. This is clear today in the sense that a lot of content is being pulled from Netflix and transferred onto other services. It can also be seen in the battle to have the best content that consumers are dying to watch. Although Netflix is the largest streaming service, their performance has actually recently gone down. According to Market Insider, “Analysts have said good content is the best driver of subscriber growth for Netflix, and the trend of studios pulling their content into siloed services means Netflix won’t be able to rely on others as much in the future” (Archer). Streaming service cost and the quality of the content it provides is what will determine the sustainability of the service.
Archer, Seth. “Netflix Is Plunging as Competition in Streaming Video Heats up (NFLX).” Business Insider, Business Insider, 25 Sept. 2017, markets.businessinsider.com/news/stocks/netflix-stock-price-is-plunging-as-competition-in-streaming-video-heats-up-2017-9-1002532923.
Burch, Sean. “Netflix Has as Many Subscribers as Cable TV, New Study Says.” TheWrap, 19 Dec. 2017, www.thewrap.com/netflix-passing-cable/.
O'Connell, Michael. “Hulu Subscriber Base Passes 17 Million.” The Hollywood Reporter, 9 Jan. 2018, www.hollywoodreporter.com/news/hulu-subscriber-base-passes-17-million-1073256.
Pelts, Shirley. “Why Comcast Considers Stacking Rights as Important.” Market Realist, 8 Sept. 2016, marketrealist.com/2016/09/comcast-consider-stacking-rights-important/.
“Streamer Things: Internet-Enabled TV Connected Devices Found in Nearly 60 Percent of U.S. TV Homes.” What People Watch, Listen To and Buy, www.nielsen.com/us/en/insights/news/2017/streamer-things-internet-enabled-tv-connected-devices-found-60-percent-us-tv-homes.html.
While the business models of SVOD services like Netflix, Youtube Red, and Amazon Prime have proven successful as contemporary industry powerhouses play catch-up, they may very well become unsustainable as media conglomerates begin to cooperate to plan their collective demise. Netflix was once dependent on previously aired network programming for its subscription base, but as the service has grown and taken a progressively increasing market share, networks have identified the service as a threat and began to pull their programming. Many network shows on Netflix now don expiration dates, foreshadowing the continual removal of valuable network content from the service. Disney even announced this summer that they intended to pull the majority of their programming from Netflix in an effort to establish their own Disney-only streaming service, a service that will undoubtedly be successful in the adolescent demographic (Castillo). The reality of the situation for Netflix and other services like Youtube Red that seek to gain market share is that they need to gradually shift all of their resources away from buying rights to existing network programming to creating original content, this shift has been observable in over the past half-decade as Netflix produces original hits like Orange is the New Black and House of Cards (Jarvey). The glaring issue with this newfound strategy lies in the fact that Netflix operates on a fixed-price model, and is able to somewhat predict their annual earnings based on the amount of subscribers they have during any given year. This model does not allow for the service to make more money for quality programming and less for unpopular programming, and though the company does keep their viewer information for research purposes, their survival is reliant on the continual growth of their subscription base. This begs the question; if and when their subscription base plateaus and they are forced to raise monthly prices, will subscribers stick around and fork over the extra fee? In addition, will their cost of customer acquisition become too high for them to grow profitably? These questions can only be answered by time, but if SVOD services without the support of networks do not continue to grow their subscription bases, they will likely be forced to downsize or fold without the profits to grow as businesses. This analysis does not even account for the ongoing trend of media consolidation among large television networks. The merger of Fox TV Group and Disney pose an existential threat for some SVOD services. Thanks to the merger Fox TV Group has began pulling their content from Netflix just as Disney has, and the two will likely cooperate in creating their own streaming services (Bond and Szalai). As media conglomerates continue to consolidate to take their once-massive market shares back from SVOD services, there will be a massive back-and-fourth undercutting between services like Netflix and large media conglomerates. The collective assets of media conglomerates far outweigh those of SVOD services, and it is more likely than not that at the end of the day, cooperating media conglomerates will have effectively eliminated SVOD services.
Works Cited
Castillo, Michelle. “Disney to End Movie Deal with Netflix and Start Its Own Streaming Services.” CNBC, CNBC, 9 Aug. 2017, www.cnbc.com/2017/08/08/disney-will-pull-its-movies-from-netflix-and-start-its-own-streaming-services.html.
Jarvey, Natalie. “YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu.” The Hollywood Reporter, Eldridge Industries, 4 Oct. 2017, www.hollywoodreporter.com/features/youtube-grows-up-inside-plan-take-netflix-hulu-1045443.
Szalai, Paul Bond Georg. “Fox-Disney: Now Get Ready for the Power Struggle.” The Hollywood Reporter, Eldridge Industries, 16 Dec. 2017, www.hollywoodreporter.com/news/fox-disney-get-ready-power-struggle-1068695.
Business models of SVOD services like Netflix, Hulu, Amazon Prime, and YouTube Red are very sustainable business. A lot of companies are joining forces to get more money from investors to keep afloat. Apple and Facebook are planning on using one billion dollars for video content this year for survival over Amazon.
ReplyDeleteAmazon is investing in more growth opportunities, according to Doug Anmuth, an analyst at JP Morgan (Palmer). Amazon shares did better than all FAANG companies in 2017 (Facebook, Apple, Netflix, Alphabet). Amazon earned 604 dollars, 56% more than in 2016. Amazon will have 44% of SVOD users in 2018 (Feldman). Amazon’s revenue mix is changing and it’s going to include third party sellers, the growth in their web services and advertising; their Prime subscription and Whole Foods acquisition will also increase share prices. Amazon Prime has subscribers in 16 countries and is now focusing on India and South Korea. Anmuth states that, "Amazon is best positioned in our view, with its in-market customers, scale, strong access to data, shopping history, ability to close the loop, & leading market share in smart home speakers with Alexa/Echo." (Palmer).
Hulu is the only streaming service where viewers can get popular TV shows, such as 30 Rock, How I Met Your Mother, and Living Single. Fox and NBC used Hulu, in 2007 and in 2009 Disney joined in. Television networks used Hulu as protection against, first YouTube, then Netflix, and then Pay TV did this; all three networks are trying to obtain new subscribers. Disney and Twenty First Century Fox have a majority control over Hulu, which allows them to invest in original programming. By having something popular, more people end up subscribing to it. They are hoping Handmaid’s Tale will enable them to get good talent to create shows and increase subscriptions. (Luckerson).
Netflix had 128 million users this year, 6.6% more than last year, allowing Netflix to remain ahead of Amazon and Hulu (Feldman). A big advantage is that Netflix is now changing to all original content as opposed to paying for TV shows. Netflix is also investigating content that will look good on smaller screens like phones. They are also working on interactive storytelling technology, which will allow the viewers to decide what’s going to happen next. Hollywood wants to end Netflix’s remaking of entertainment because Netflix presently dominates all discussions in the industry (Luckerson). If Netflix doesn’t continue to perform, investors will question whether spending 7 billion dollars on content is sustainable because of competition from Amazon and Hulu. Although Netflix has high quality shows it remains just barely ahead of the competition (Feldman).
The top spot for video viewing is still held by YouTube (Feldman). If Hulu, Amazon, and Netflix want to expand and increase their number of users they will have to continue on the paths they have formed while creating new avenues for revenue. Because of Hollywood’s beliefs, the SVOD services will be forced to continue to improve. Although adults now watch 73 minutes a day online, they still spend 4 hours a day on television (Feldman). SVOD companies will have to flip these numbers and improve upon their models to remain profitable.
Feldman, Dana. “Netflix Remains Ahead Of Amazon And Hulu With 128M Viewers Expected This Year.” Forbes, Forbes Magazine, 13 Apr. 2017, www.forbes.com/sites/danafeldman/2017/04/13/netflix-remains-ahead-of-amazon-and-hulu-with-128m-viewers-expected-this-year/#515912f0216c
Luckerson, Victor. “Hulu Is Hollywood's Last Line of Defense Against a Tech Takeover.” The Ringer, The Ringer, 12 Jan. 2018, www.theringer.com/tech/2018/1/12/16881390/hulu-netflix-amazon-ces-2018.
Palmer, Annie. “Why Amazon Could Soon Be Headed for a $1 Trillion Market Cap.” TheStreet, TheStreet, 10 Jan. 2018, www.thestreet.com/story/14445272/1/amazon-trillion-dollar-market-cap.html
Over the past few years SVOD services, such as Netflix, Hulu, HBO Go, Amazon Prime, and YouTube Red have been taking over the realm of watching content all over the world, with the ‘binge’ culture growing along with it. Due to their immediate success, the sustainability of their business models has come into question, as to whether or not they will last at this height of success on a national level. “The "subscription economy," a term coined by Tien Tzuo, refers to businesses that charge for services rather than physical products. This business model emphasizes long-term relationships with customers. Since an unhappy customer can simply unsubscribe at any point, companies must invest in real customer service and listen to client feedback. If they do it right, they can profit from recurring revenue and a loyal customer base” (Pattani). The building of strong relatinships is a stark different between the previous consuming of content method of television, where providers are just their providing what is available to the consumer. Additionally, the consumer-provider relationships is estranged by, as many have experienced, a tough get in contact method, like being on hold for hours for a question or a change in their plan.
ReplyDeleteNow, it is clear, that their business models are built to stay and be successful within today’s society. Despite, a rise in competition in the SVOD network of services, it does not weaken their spot within the industry. The challenges continue to cement the viability of their business models, as “the building out of the internet video space serves to solidify Netflix’s position — and to weaken that of the traditional cable bundle” (Udland). While, Udland specifically references Netflix here, it is more so an example of how the SVOD services should not be threatened from outside growing oppositions to their business model, such as Disney’s potential new streaming service, because the building up of SVOD services solidifies SVOD’s viability within that space and proves it is here to stay.
Additionally, “Netflix has already established itself as a pillar of the entertainment industry and shows like “House of Cards” and “Stranger Things” have shown the company is a major cultural force. The company’s name has also become a verb (“Netflix and chill”), a sign that while its position might seem available to disruption, it is actually an entrenched consumer preference” (Udland). Other SVOD services also have claims to fame as well with Hulu’s “A Handmaid’s Tale”, HBO Go with “Game of Thrones”, and Amazon Prime with “Transparent”. Thus, reaffirming their already established impact on the world of consuming content that they are not dependent on other media companies to provide.
Also in addition to the growing internet streaming content space, YouTube Red is also adding to the legitimacy of the SVOD business model with that venture of their own. “If there's one thing that Netflix's House of Cards, Amazon's Transparent and Hulu's drama series Emmy winner The Handmaid's Tale have shown, it's that it only takes one big hit to earn Hollywood's respect and, in many cases, a subscriber's credit card information” (Jarvey). Thus, Jarvey is showing here that in addition to the cultural popularity that SVOD’s have had, the overall hits and star power is also playing a large role in the overall viability of SVOD services. The combination of both a penetration into the overall normalcies of the American popular culture and the star/hit power these SVOD services have had thus cement its place as a both success and viable for the future business model with the world of consuming content.
Works Cited (for above)
ReplyDeleteJarvey, Natalie. “YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/features/youtube-grows-up-inside-plan-take-netflix-hulu-1045443.
Pattani, Aneri. “Americans spent $420 billion in effort to stop buying things last year.” CNBC, CNBC, 1 Nov. 2016, www.cnbc.com/2016/10/31/why-spotify-netflix-and-hbo-nailed-business-model-of-the-future.html.
Udland, Myles. “Disney's new streaming service shouldn't scare Netflix.” Yahoo! Finance, Yahoo!, 10 Nov. 2017, finance.yahoo.com/news/disneys-new-streaming-service-shouldnt-scare-netflix-174745047.html.
The business models of streaming video on demand (SVOD) services like Netflix, Amazon Prime, YouTube Red, and Hulu are only destined for success. The millennial generation loves to have options and not be tied down to one kind of cable package hence the SVOD services are completely sustainable because more people are turning away from traditional cable that comes with pricey monthly bills and instead opting for low cost packages with many shows and movies.
ReplyDeleteNow-a-days more people are purchasing Apple TVs that allow you to sync the television to WiFi in order to watch SVOD services. This eliminates the need for cable all together. This seems to have more of an appeal because a viewer is not tied down to a monthly package of certain channels but instead has a wide variety of shows and movies at their fingertips.
Netflix has as many subscribers as cable television, which leads me to believe that it will only continue to grow and eventually surpass cable. In Sean Burch’s article from December of 2017, he writes, “Netflix added another 850,000 domestic subscribers during its last quarter, and saw its total U.S. customer base swell to more than 50 million in 2017” (Burch). This is very interesting because even while Netflix is competing with big names like Hulu and Amazon Prime, they are still adding more and more subscribers.
Netflix is not the only streaming device that is seeing great success. According to O’Connell, “Hulu's total audience now stands at 54 million total unique viewers. Its library has expanded to 1,700 TV titles and more than 75,000 episodes” (O’Connell). Hulu has a diverse library whereas cable television is often full of re-runs of programs that are not interesting. Streaming services such as Hulu allow viewers to pick exactly what you want to watch at any time and watch as much as you would like, anywhere.
However, the biggest challenges that streaming devices face are competing with each other. There are so many different types of SVOD platforms that it is hard to choose just which ones to subscribe to, but the low prices make it easy to subscribe to more than one. In Burch’s article “Netflix Has as Many Subscribers as Cable,” he writes, “The PWC report called it a ‘streaming explosion for all ages,’ with 63 percent of respondents between 50-59 saying they access TV on the internet — a 15 percent jump from 2016.” (Burch). Now that all ages are involved in streaming, it is not just teenagers and mid-20 year olds that are paying for these services, but also their parents and grandparents.
I believe SVOD services will continue to grow as time goes on because cable channels will begin to develop their own methods of streaming. NBC will probably do the same but with only their own content. In USA Today’s ‘Talking Tech,’ Snider writes, “There are more than 200 subscription video services now – 202 as of the third quarter of 2017, according to Parks Associates – with 60 new services introduced in 2016 and so far in 2017” (Snider). From 2016 to 2017, streaming services have only continued to grow and I only see continual growth.
Works Cited:
Burch, Sean. “Netflix Has as Many Subscribers as Cable TV, New Study Says.” The Wrap, 19 Dec. 2017.
O’Connell, Michael. “Hulu Subscriber Base Passes 17 Million.” The Hollywood Reporter, 9 Jan. 2018.
Snider, Mike, “Cord Cutters Can Now Pick from 200 Services, but Mostly Want the Top Four.” USA Today, Gannett Satellite Information Network, 10 Nov. 2017.
To the majority of people, purchasing a cable package and flipping through channels is too daunting of a task to bear. The population as a whole is too impatient and anxious to wait for their shows to come on television once a week. We want to watch our shows when we see fit, which is causing traditional television to dwindle. The way we consume media is changing as the use of technology soars. Streaming video on demand (SVOD) businesses are, in my opinion, one of the most popular trends, and they are completely transforming how we watch television. The success of Netflix, Hulu, Amazon Prime and YouTube Red is unprecedented.
ReplyDeleteEach one of these streaming platforms is unique because, for the most part, they all have different shows/ movies, providing users with a diverse range of content. Each service buys out different shows and movies, and Netflix even creates their own original content that cannot be found anywhere else. The competition between these companies could play a role in its worldwide success. Because each streaming service is fighting for the most subscribers, the quality of content they own and produce is increasing. Netflix dominates the pool, and we see just how far and wide its impact has traveled in an article titled “Hollwood in 2018: The Old Order Ends, A New One Rises.” It says, “In the last three months, Netflix has continued to swell in size, with a market cap now at $83 billion, making it bigger than any media company besides Disney, including Time Warner” (Waxman). But companies like Hulu are not going anywhere, and are even on their way to a big come-up. In the article “Hulu is Hollywood’s Last Line of Defense Against a Tech Takeover” by Victor Luckerson, we see just how fast Hulu is growing and expanding. It says, “Hulu is uniquely positioned to become a giant in its own right, if it can keep its tenuous Hollywood alliances intact and find more shows that manage to stand out in a glut of content” (Luckerson).
Streaming services give viewers the freedom to watch what they want at their leisure, making it the most desirable way to consume television. The simple fact that it is much more convenient than having a cable package is what not only keep streaming services afloat, but helps them thrive and compete against one another. These streaming services have become so popular and successful because of the quick, diverse and large amount of content that they offer. The fact that streaming services are easily accessible, its success has only grown because it appeals to people of all ages, but the most abundant of the subscribers are those in the millennial generation. An article published by Fact Tank says, “About six-in-ten of those ages 18 to 29 (61%) say the primary way they watch television now is with streaming services on the internet, compared with 31% who say they mostly watch via a cable or satellite subscription…” (Raine).
I have no doubt that SVOD services will continue to flourish and expand. As they become more readily available with the Amazon Fire Stick and Smart TVs, people will continue to stream the content they watch and abandon or lessen the amount of cable television they indulge in.
WORKS CITED
Rainie, Lee. “About 6 in 10 Young Adults in U.S. Primarily Use Online Streaming to Watch TV.” Pew Research Center, 13 Sept. 2017, www.pewresearch.org/fact-tank/2017/09/13/about-6-in-10-young-adults-in-u-s-primarily-use-online-streaming-to-watch-tv/.
Waxman, Sharon. Hollywood in 2018: The Old Order Ends, A New One Rises. The Wrap , www.thewrap.com/hollywood-2018-new-order-netflix-facebook-amazon-disney/.
Luckerson, Victor. “Hulu Is Hollywood's Last Line of Defense Against a Tech Takeover.” The Ringer, The Ringer, 12 Jan. 2018, www.theringer.com/tech/2018/1/12/16881390/hulu-netflix-amazon-ces-2018.
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ReplyDeleteBusiness model SVOD services such as Netflix, Hulu, Amazon Prime, and YouTube Red are sustainable due to their constant growth in subscribers and money. With today’s technology, the possibilities are endless for SVOD services.
ReplyDeleteAlthough Amazon does not publish the total number of Prime subscribers, it was published that in 2017 alone, Amazon gained around 95,000 global Prime subscribers and its market cap is at $604 billion. JPMorgan analyst Doug Anmuth even went as far as to state that “Amazon's outsized gains are unlikely to diminish in 2018” (Palmer).
Netflix is the veteran SVOD service and even with its continuous price increases; it still managed to gain 8 million subscribers in the last few months of 2017. Netflix credits its popular original series such as Stranger Things, Orange is the New Black, and The Crown for the large increase of subscribers over such a short period of time. When asked about the 10% price increase, Netflix CEO Reed Hastings said it had "very little effect on signups and growth." Even with Disney announcing that it will be pulling its content from Netflix in August, the company is not worried, stating, "The market for entertainment time is vast and can support many successful services," (fiegerman).
Although still relatively new, YouTube Red still has a long way to go before reaching the popularity that Amazon, Netflix, and Hulu currently have. YouTube Red costs $10/month but many subscribers are only using it on a trial basis and not the actual subscription. One reason for this is most likely due to the limited original content that YouTube currently has and the fact that Amazon, Netflix, and Hulu are more well known. Another reason may also be due to the fact that YouTube Red is currently only available in the U.S., Australia, New Zealand, Korea and Mexico (Mitroff & Martin).
Amazon, Netflix, Hulu, and YouTube Red have also secured their success by producing original shows that can only be accessed on their streaming services. “If there's one thing that Netflix's House of Cards, Amazon's Transparent and Hulu's drama series Emmy winner The Handmaid's Tale have shown, it's that it only takes one big hit to earn Hollywood's respect and, in many cases, a subscriber's credit card information. (Jarvey). Many people have even been canceling their cable and are instead subscribed to one or two SVOD services, giving cable services a run for their money and forcing them to come up with new ways to maintain their own subscribers. Seeing as Netflix has been around for a few years as an SVOD and the company has only gained more and more subscribers, it is safe to say that SVOD services are here to stay and if anything, they will only continue to thrive.
Works Cited:
Fiegerman, S. (n.d.). Netflix adds a record 8 million subscribers. Retrieved January 28, 2018, from http://money.cnn.com/2018/01/22/technology/netflix-earnings/index.html
Jarvey, N. (2017, October 04). YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu. Retrieved January 28, 2018, from https://www.hollywoodreporter.com/features/youtube-grows-up-inside-plan-take-netflix-hulu-1045443
Mitroff Taylor Martin, S., & Martin, T. (2017, October 27). Everything you need to know about YouTube Red. Retrieved January 28, 2018, from https://www.cnet.com/how-to/youtube-red-details/
Palmer, A. (2018, January 10). Why Amazon could soon be headed for a $1 trillion market cap. Retrieved January 28, 2018, from https://www.thestreet.com/story/14445272/1/amazon-trillion-dollar-market-cap.html
With the constant decline of regular cable and television service providers among viewers, SVOD services are destined for success. These providers are able to eliminate the issues viewers have with regular television networks – cost and convenience. Services like Netflix, Hulu, Amazon Prime allow the consumer to view at their convenience and are very inexpensive compared to cable or satellite television. They have adapted to the way society has changed with our demand for content at our fingertips at all times, whenever we want it. Lately, it seems that each provider is fighting to claim the spot as the “best”. The competitiveness between these providers has been more apparent recently, with each company trying to top the next and other sites, such as Facebook and YouTube, trying to stay in the game.
ReplyDeleteNetflix, the largest SVOD provider, has around 100 million subscribers, a number that has been steadily increasing over the years, surpassing even their own expectations (Burch). However, there has been a debate about if their growth will be as steady and expectation-crushing because of their price increases. It’s also no surprise that they have been pouring most of their money into Netflix Originals, “Our investment in Netflix originals is over a quarter of our total P&L content budget in 2017 and will continue to grow” (Lynley). Because of this tremendous amount of spending for their originals, their content library is starting to go downhill. They are getting rid of shows people mainly use Netflix for and are being replaced with countless Netflix Originals. Stranger Things, Orange Is the New Black, and House of Cards are all great shows that exploded with popularity, but that doesn’t mean that every single Netflix Original is great. Netflix is starting to take a dangerous turn in terms of keeping subscribers in this already competitive market.
Hulu, now with over 17 million subscribers, has clearly been fighting to increase their subscriber count for a spot at the top (O’Connell). They added live TV and have a content library that is double the size than that of Netflix and Amazon (O’Connell). Their focus is quite different than Netflix’s. Instead of making original content, they focus on getting content from major studios. Hulu has just one in-house show, while Netflix has 13 and Amazon Prime has 12 (Goldberg). Luckerson touches on this fact of Netflix relying heavily on its originals, “More than anything, Hulu’s biggest advantage going forward is that Hollywood desperately needs to stop Netflix from remaking all of entertainment in its own image” (Luckerson). Hulu’s focus on having both content from various studios and from indie producers and access to live TV is a model that is destined for success. Another smart strategy Hulu has incorporated is picking up shows that Netflix has dropped. There is no better way to bring in annoyed Netflix subscribers who just lost access to their favorite shows. In today’s world of people wanting a wide variety of content at all times, especially in one convenient location, leads Hulu in the path for success and gives them the ability to be a sustainable business.
Overall, the sustainability of these SVOD service providers is indefinite right now. There is no evidence to point towards a decline in subscribers, at least not any time soon. More and more people every day are switching from cable/satellite to using SVOD services. The convenience and affordability of them makes it hard to pass up. The only hard part is choosing which service to get, since all of them are fighting hard to gain our subscription.
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DeleteWorks Cited
Burch, Sean. “Netflix Has as Many Subscribers as Cable TV, New Study Says.” The Wrap, 19 Dec. 2017.
Goldberg, Lesley. “Where Streamers Get Their Original Content: Comparing Netflix, Amazon and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/news/streaming-services-get-original-tv-shows-movies-1045444.
Luckerson, Victor. “Hulu Is Hollywood's Last Line of Defense Against a Tech Takeover.” The Ringer, The Ringer, 12 Jan. 2018, www.theringer.com/tech/2018/1/12/16881390/hulu-netflix-amazon-ces-2018.
Lynley, Matthew. “Netflix Crushes Its Own Expectations for Subscription Growth Again.” TechCrunch, TechCrunch, 16 Oct. 2017, techcrunch.com/2017/10/16/netflix-crushes-its-own-expectations-for-subscription-growth-again/.
O’Connell, Michael. “Hulu Subscriber Base Passes 17 Million.” The Hollywood Reporter, 9 Jan. 2018.
As more and more Millennials and Gen Zers enter the work force and begin paying their own bills for services that they choose, one theme rings clear: “They respond to independence” and “self-direction” (Bernstein). SVOD services like Netflix, Hulu, Amazon Prime and YouTube Red give these generations an opportunity to be both independent and self direct. A subscriber to these platforms gets to choose what they watch and when. Unfortunately, not all of these video streaming services are sustainable.
ReplyDeleteNetflix has been creating original content (“Stranger Things,” “Black Mirror,” and “The Crown”) for a few years now but, not all of that content has been a good investment (Trainer). Just six months ago, Netflix had to cancel “Sense8” and “The Get Down” due to a lack of turn around. Original content can be hard to sell, especially to a generation that is known for being nostalgic. Vinyl sales went up 30% in 2015 and have continued to rise (Spratt). Maybe Netflix missed something when they stopped sending out DVDs - film strips might have been the way to go.
Trainer writes, “Netflix's streaming content obligations continue to grow faster than revenue. We first warned about Netflix's alarming streaming content obligation growth in 2014. Since then, the issue has only worsened as free cash flow has fallen further.” Due to the way that Netflix operates currently, they are tying up all of their money in streaming and creating original content. It seems that if they do not relax with their original content they could go bankrupt. This video streaming platform has been in the red since 2010 when it first started increasing its library size and when competitors began to pop up.
Netflix has also relied on new subscribers for money and their audience is constantly growing - this past year there was a 6.6% increase in subscribers (Feldman) - but their growth has been decreasing each year. “In comparison, Amazon will have 85.3 million viewers this year, or 44% of users. Hulu is taking up the rear with 32 million viewers, which is 16.5% of total users” (Feldman). Due to this continuous growth - even it is decreasing - there is an obvious audience for it. Each SVOD will need to make adjustments to fix their issues, like Netflix.
One of the most important things for SVOD platforms to combat is still live television. “According to eMarketer, there are an approximate 2.5 viewers for each paid Netflix subscription. U.S. adults will average 73 minutes per day getting their entertainment fix online this year and a little over four hours a day watching traditional television” (Feldman). If adults are still watching more than four hours of television in comparison to just over an hour of streamed content, then maybe binging needs to be sold better. Maybe until everything is live streamed, SVOD platforms will not be completely sustainable.
Bernstein, Ruth. “Move Over Millennials -- Here Comes Gen Z.” Ad Age, 21 Jan. 2015, adage.com/article/cmo-strategy/move-millennials-gen-z/296577/.
Feldman, Dana. “Netflix Remains Ahead Of Amazon And Hulu With 128M Viewers Expected This Year.” Forbes, Forbes Magazine, 13 Apr. 2017, www.forbes.com/sites/danafeldman/2017/04/13/netflix-remains-ahead-of-amazon-and-hulu-with-128m-viewers-expected-this-year/#6a40824b216c.
Silbert, Sarah. “Here's how Hulu is finally becoming a competitive streaming service.” Fortune, 16 Oct. 2015, fortune.com/2015/10/16/hulu-is-finally-competitive/.
Spratt, Vicky. “Why Are Millennials The Most Nostalgic Generation Ever?” Debrief, Debrief, 28 Mar. 2016, thedebrief.co.uk/news/opinion/millennials-nostalgic-generation-ever/.
Trainer Long/short equity, value, research analyst, Deep ValueMarketplaceValue Investing 2.0, David . “Netflixs Costly Business Model Proves Unsustainable.” Seeking Alpha, 19 June 2017, seekingalpha.com/article/4082083-netflixs-costly-business-model-proves-unsustainable.
SVOD services such as Netflix, Hulu, Amazon Prime, and YouTube Red all have one thing in common: they are sustainable business models. But now the question is how? YouTube Red is a prime example of a sustainable business model. With its initial launch in 2005, it has only been getting more and more popular. I feel as though companies such as YouTube are constantly making, as well as keeping up with new trends so that their content and services never go out of style. In the article, YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu by Natalie Jarvey, she mentions how Morgan Spurlock, creator of Super Size Me sequel, decided to have the movie premiere on YouTube Red. Spurlock mentions how “You don't make movies to sit on a shelf and collect dust. You want them to actually be enjoyed by as many people as you can. And their plan is to make this a noisy partnership." This is what is so innovative about SVOD services such as Netflix, Hulu, Amazon Prime, and YouTube Red. Unlike your tradition movie that is in theatres temporarily until it is made for DVDs, these streaming video on demand services allow for people to watch anytime and anywhere. The point of SVOD are to provide easy and accessible services for their audiences. The article also touches upon how there has been a decline for broadcast networks since many prefer for a non-contracted cable subscription. If these services are basing off their change and growth by what their demographic wants, there really is no issue with these services dying.
ReplyDeleteIn terms of other services, I used the article Where Streamers Get Their Original Content - Comparing Netflix, Amazon and Hulu by Lesley Goldberg, to see how SVOD services like Netflix, Amazon, and Hulu compared to one another. The article mentions how Netflix and Amazon have been pushing for their own original scripted content. I think this is part of their sustainable business plan. If they create content that is only shown on their service and it is actually pretty good, then that will drive more people to the service. This goes to show how these services are constantly adapting to new and innovative ways. In an article from Cleeng, BENEDICTE GUICHARD wrote an article that talks about what are key strategies SVOD use. Some strategies consisted of coupons and bundles. Hulu and Spotify currently have a bundle going on for students that if you get spotify, you will get Hulu for free as well on top of the student discount offered. Many Gen Zers and millennials are still in school so this is a perfect way to keep their subscribers coming.
Overall, these SVOD services know exactly what they are doing whether it be partnering up with another service, offering discounts and coupons. They are fully aware of what is going to keep their business going, prolonging their sustainability.
Jarvey, Natalie. “YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/features/youtube-grows-up-inside-plan-take-netflix-hulu-1045443.
Goldberg, Lesley. “Where Streamers Get Their Original Content: Comparing Netflix, Amazon and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/news/streaming-services-get-original-tv-shows-movies-1045444.
Guichard, Benedicte. “What Are The Key SVOD Revenue Strategies?” Cleeng, 7 October. 2017,
https://cleeng.com/blog/key-svod-revenue-strategies/#gs._ZStPSk
SVOD services like Netflix, Hulu, Amazon Prime and YouTube Red are definitely sustainable in today’s market. More now than ever, consumers are “cutting the cord” and breaking off from the tradition model of cable. These services offer unique perks and at such a low price that even if a user subscribes to several, they will still be saving money compared to if they had a cable subscription.
ReplyDeleteAs perhaps the most prominent subscription service, Netflix alone has just as many subscribers as cable, according to The Wrap. In a survey done by PricewaterhouseCoopers and reported by The Wrap, 73% of surveyed users still pay for traditional television services, such as cable or satellite. Netflix isn’t the only service cashing in on the new cord-cutting idea. Hulu is offering their limited commercials plan free with a Spotify subscription, and vice versa. Hulu is unique in that it is owned by cable companies (Fox, NBC and ABC) so it almost makes up for the DVR feature consumers lose when the officially cut the cord by allowing subscribers to watch other popular shows like This Is Us and The Bachelor the day after they air, making it even more sustainable in today’s market. Google is debuting its SVOD service, YouTube Red, with the help of big name and well-liked celebrities such as Demi Lovato, Ryan Seacrest and Ellen DeGeneres. Amazon Prime offers streaming service with its membership, with shows like The Marvelous Mrs. Maisel.
An interesting point worth noting is how most of these paid-services started without ads. Netflix doesn’t have ads, never had ads and relies solely on subscription revenue. However, at the beginning of Hulu, it had an option where viewers could watch most shows for free with ads. Then they phased that out, making an option where you could pay, but still have ads. Although it is a setback and initially makes consumers unhappy about it, chances are viewers won’t swear off Hulu forever and will keep subscribing to the unique perks of watching the newest episodes of popular shows the day after they air. To keep up with the people who just can’t give up on live television and what it offers, such as the news or sports, Hulu and other companies like DirecTV have offered a live television package that doesn’t require cable with popular channels such as HGTV, NBC, Fox and E!.
The Handmaid’s Tale just won a Golden Globe for best television Drama. The Crown’s Claire Foy won a SAG award for best female actor in a television drama. The one thing these two shows have in common is that users can’t get them with a traditional cable or satellite subscription, making SVOD services that much more appealing. The Handmaid’s Tale, The Crown and other popular shows are only available on Hulu and Netflix, respectively. SVOD services offer something traditional services don’t: original content. So if consumers want to get in on these award-winning shows and others like it, they have to subscribe to a service.
Works Cited
Burch, Sean. “Netflix Has as Many Subscribers as Cable TV, New Study Says.” TheWrap, 19 Dec. 2017, www.thewrap.com/netflix-passing-cable/.
Jarvey, Natalie. “YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/features/youtube-grows-up-inside-plan-take-netflix-hulu-1045443.
Luckerson, Victor. “Hulu Is Hollywood's Last Line of Defense Against a Tech Takeover.” The Ringer, The Ringer, 12 Jan. 2018, www.theringer.com/tech/2018/1/12/16881390/hulu-netflix-amazon-ces-2018.
This comment has been removed by the author.
ReplyDeleteWorks Cited:
DeleteArcher, Seth. “Netflix Is Plunging as Competition in Streaming Video Heats up (NFLX).” Business Insider, Business Insider, 25 Sept. 2017, markets.businessinsider.com/news/stocks/netflix-stock-price-is-plunging-as-competition-in-streaming-video-heats-up-2017-9-1002532923.
Burch, Sean. “Netflix Has as Many Subscribers as Cable TV, New Study Says.” TheWrap, 19 Dec. 2017, www.thewrap.com/netflix-passing-cable/.
O'Connell, Michael. “Hulu Subscriber Base Passes 17 Million.” The Hollywood Reporter, 9 Jan. 2018, www.hollywoodreporter.com/news/hulu-subscriber-base-passes-17-million-1073256.
Pelts, Shirley. “Why Comcast Considers Stacking Rights as Important.” Market Realist, 8 Sept. 2016, marketrealist.com/2016/09/comcast-consider-stacking-rights-important/.
“Streamer Things: Internet-Enabled TV Connected Devices Found in Nearly 60 Percent of U.S. TV Homes.” What People Watch, Listen To and Buy, www.nielsen.com/us/en/insights/news/2017/streamer-things-internet-enabled-tv-connected-devices-found-60-percent-us-tv-homes.html.
As Netflix, Hulu, Amazon Prime, and other streaming video on demand (SVOD) services continue to get purchased by big time networks, the window for the basic cable package shrinks. With that being said, do SVOD services have strong business models? Well, it’s hard to argue they don’t as these companies are just starting to really flourish. Victoria Luckerson, of The Ringer, had this to say about Hulu; “this week the company announced it has 17 million subscribers, having gained about 5 million over the last year and a half.” The company is eleven years old and yet it’s now seeing it’s largest subscription numbers. But why? Why is Hulu all of a sudden having all this major success? It’s because times are changing and SVOD services are taking the simple cable packages place as the most desirable entertainment. The only thing keeping basic cable around is live entertainment, however as we have recently seen, these SVOD services are able to bring their viewers live entertainment as well. Natalie Jarvey and Georg Szalai of the Hollywood Reporter had this to say in their article, How Disney Will Benefit From Becoming Hulu’s Majority Owner Via It’s Fox Deal, “The Disney CEO on Thursday reiterated past comments that the company is pushing into direct-to-consumer offers more aggressively while continuing to offer its content in the traditional pay-TV ecosystem. If that ends up facing major challenges amid cord-cutting, Iger said Disney could simply adjust its strategy and "flip a switch" to focus even more on the direct-to-consumer space. Even before the deal announcement, Wall Street observers suggested there would be benefits for Disney. "Owning a second major studio [after the Fox deal] could help Disney build out its OTT platform due to launch in 2019 with more content, and owning a majority stake in Hulu would give Disney control of this SVOD service as well as a potentially large virtual bundle to help offset cable sub declines," Macquarie Capital analyst Tim Nollen said in a report published before the deal was unveiled.” This tells us that Disney plans to try and maintain cable sales along with releasing more and new content directly to the consumer/streamers. While some SVOD services have different business plans than others (for example Hulu looks to Major studios for content, while Netflix and Amazon look to own their content and scripts), they each hit the main target audience as these SVOD services have created a demand for streaming TV.
ReplyDeleteWork Cited-
Szalai, Natalie JarveyGeorg. “How Disney Will Benefit From Becoming Hulu's Majority Owner Via Its Fox Deal.” The Hollywood Reporter, 14 Dec. 2017, www.hollywoodreporter.com/news/how-disney-will-benefit-becoming-hulus-majority-owner-fox-deal-1067567.
Goldberg, Lesley. “Where Streamers Get Their Original Content: Comparing Netflix, Amazon and Hulu.” The Hollywood Reporter, 4 Oct. 2017, www.hollywoodreporter.com/news/streaming-services-get-original-tv-shows-movies-1045444.
Luckerson, Victor. “Hulu Is Hollywood's Last Line of Defense Against a Tech Takeover.” The Ringer, The Ringer, 12 Jan. 2018, www.theringer.com/tech/2018/1/12/16881390/hulu-netflix-amazon-ces-2018.
There is a sense of nostalgia that myself, and other consumers feel when they think back to watching their favorite programs on network television. This brings back memories of the stress that was making sure you were home on time so you wouldn’t miss any important parts of the show. The annoying commercial breaks that would come just when the most anticipated part of the season was about to happen, and of course having to wait a whole week just to see what was going to happen to your favorite character next. Yes, this is still a part of a consumer’s experience but it doesn’t have to be for the majority of shows. This element of convenience is one of the reasons that SVOD services are so popular. Consumers like to binge, they like not having commercials, and they like viewing their programs whenever they want. As Pelts explains, “The convenience of accessing content anytime and anywhere has been one of the reasons that millennials are watching content online. According to the Digitalsmiths 4Q15 video trend report, about 56.5% of 3,120 consumers surveyed said they prefer over-the-top services such as Hulu for the convenience of watching content anytime” (Pelts).
ReplyDeleteIt is this convenience aspect of services like Netflix, Hulu, HBOGO, and Amazon that makes the SVOD model so sustainable. The statistics prove it to be true as well. In 2017 Netflix, the most popular streaming service, added another 850,000 subscribers (Burch). Not to mention, Hulu just had a historic year increasing their subscriber base by 5 million which is a 42% increase (O’Connell).
Another telling indication of the sustainability of SVOD services are the use of internet enabled devices. A 2017 Nielsen study revealed that 58.7% of TV homes have at least one internet enabled device that can be used for SVOD. This is a 12% increase from 2016 (Nielsen). An important component of this data is, “Homes with internet enabled devices tend to be young, employed and affluent- characteristics that marketers and advertisers crave in an audience” (Nielsen). The fact that younger homes are the ones with internet enabled devices is important because it shows what future generations will be using. This means that future generations will be taught the same habits, and will be more accustomed to using SVOD services, which adds to the sustainability of the model.
The real threat to SVOD is the competition between different subscription services. This is clear today in the sense that a lot of content is being pulled from Netflix and transferred onto other services. It can also be seen in the battle to have the best content that consumers are dying to watch. Although Netflix is the largest streaming service, their performance has actually recently gone down. According to Market Insider, “Analysts have said good content is the best driver of subscriber growth for Netflix, and the trend of studios pulling their content into siloed services means Netflix won’t be able to rely on others as much in the future” (Archer). Streaming service cost and the quality of the content it provides is what will determine the sustainability of the service.
Works Cited:
DeleteArcher, Seth. “Netflix Is Plunging as Competition in Streaming Video Heats up (NFLX).” Business Insider, Business Insider, 25 Sept. 2017, markets.businessinsider.com/news/stocks/netflix-stock-price-is-plunging-as-competition-in-streaming-video-heats-up-2017-9-1002532923.
Burch, Sean. “Netflix Has as Many Subscribers as Cable TV, New Study Says.” TheWrap, 19 Dec. 2017, www.thewrap.com/netflix-passing-cable/.
O'Connell, Michael. “Hulu Subscriber Base Passes 17 Million.” The Hollywood Reporter, 9 Jan. 2018, www.hollywoodreporter.com/news/hulu-subscriber-base-passes-17-million-1073256.
Pelts, Shirley. “Why Comcast Considers Stacking Rights as Important.” Market Realist, 8 Sept. 2016, marketrealist.com/2016/09/comcast-consider-stacking-rights-important/.
“Streamer Things: Internet-Enabled TV Connected Devices Found in Nearly 60 Percent of U.S. TV Homes.” What People Watch, Listen To and Buy, www.nielsen.com/us/en/insights/news/2017/streamer-things-internet-enabled-tv-connected-devices-found-60-percent-us-tv-homes.html.
While the business models of SVOD services like Netflix, Youtube Red, and Amazon Prime have proven successful as contemporary industry powerhouses play catch-up, they may very well become unsustainable as media conglomerates begin to cooperate to plan their collective demise. Netflix was once dependent on previously aired network programming for its subscription base, but as the service has grown and taken a progressively increasing market share, networks have identified the service as a threat and began to pull their programming. Many network shows on Netflix now don expiration dates, foreshadowing the continual removal of valuable network content from the service. Disney even announced this summer that they intended to pull the majority of their programming from Netflix in an effort to establish their own Disney-only streaming service, a service that will undoubtedly be successful in the adolescent demographic (Castillo).
ReplyDeleteThe reality of the situation for Netflix and other services like Youtube Red that seek to gain market share is that they need to gradually shift all of their resources away from buying rights to existing network programming to creating original content, this shift has been observable in over the past half-decade as Netflix produces original hits like Orange is the New Black and House of Cards (Jarvey). The glaring issue with this newfound strategy lies in the fact that Netflix operates on a fixed-price model, and is able to somewhat predict their annual earnings based on the amount of subscribers they have during any given year. This model does not allow for the service to make more money for quality programming and less for unpopular programming, and though the company does keep their viewer information for research purposes, their survival is reliant on the continual growth of their subscription base. This begs the question; if and when their subscription base plateaus and they are forced to raise monthly prices, will subscribers stick around and fork over the extra fee? In addition, will their cost of customer acquisition become too high for them to grow profitably? These questions can only be answered by time, but if SVOD services without the support of networks do not continue to grow their subscription bases, they will likely be forced to downsize or fold without the profits to grow as businesses.
This analysis does not even account for the ongoing trend of media consolidation among large television networks. The merger of Fox TV Group and Disney pose an existential threat for some SVOD services. Thanks to the merger Fox TV Group has began pulling their content from Netflix just as Disney has, and the two will likely cooperate in creating their own streaming services (Bond and Szalai). As media conglomerates continue to consolidate to take their once-massive market shares back from SVOD services, there will be a massive back-and-fourth undercutting between services like Netflix and large media conglomerates. The collective assets of media conglomerates far outweigh those of SVOD services, and it is more likely than not that at the end of the day, cooperating media conglomerates will have effectively eliminated SVOD services.
Works Cited
Castillo, Michelle. “Disney to End Movie Deal with Netflix and Start Its Own Streaming Services.” CNBC, CNBC, 9 Aug. 2017, www.cnbc.com/2017/08/08/disney-will-pull-its-movies-from-netflix-and-start-its-own-streaming-services.html.
Jarvey, Natalie. “YouTube Grows Up: Inside the Plan to Take on Netflix and Hulu.” The Hollywood Reporter, Eldridge Industries, 4 Oct. 2017, www.hollywoodreporter.com/features/youtube-grows-up-inside-plan-take-netflix-hulu-1045443.
Szalai, Paul Bond Georg. “Fox-Disney: Now Get Ready for the Power Struggle.” The Hollywood Reporter, Eldridge Industries, 16 Dec. 2017, www.hollywoodreporter.com/news/fox-disney-get-ready-power-struggle-1068695.