The Streaming Age

On the day that the Disney+ streaming platform had launched, a tweet went viral questioning the idea that subscribing to streaming media services was the cost-saving replacement to the monthly cable bill.

It’s a basic consumer premise that there are only so many dollars to spend on home entertainment. Rather than paying a substantial monthly bill for a lot of channels with ads that they mostly don’t watch, they become a member of a subscription video-on-demand service that provides them with the programming they want, when they want, ad-free.

It used to be simpler when the choice was pay per use Video on Demand, or Subscription Video on Demand services like Netflix and Amazon Prime, known in the industry as Over The Top services or OTT. They originally aggregated the content from studios and independent producers to offer titles like a virtual DVD rental store. But both companies now also produce their own titles, and are effectively operating as their own studios. With Netflix also taking interest in purchasing theaters for Oscar mandatory minimum cinema runs, is theatrical exhibition on the horizon for the company?

A set of laws from 1946 known as the Paramount decree currently stands in the way of that, prohibiting studios from owning their own cinemas. It addressed anti-competitive concerns at the time where a studio’s market power could limit and determine which theaters would show what movies. Netflix considers the Paramount ruling anachronistic, as does the Justice Department who are now in the process of dismantling the Paramount rules, arguing that they unfairly restrict technological innovation at a time where there is abundant aftermarket distribution opportunities following a theatrical run that did not exist in the 1940s. For many independent film producers, a theatrical exhibition’s primary function is for promotional exposure or to meet the minimum requirement for Oscar contention, rather than box office revenue.

Seeing an online distribution market to exploit, the traditional studios and broadcasters, basically anyone with a library of titles, are moving into the OTT game. Fragmentation is about to set in as we see studios with their own OTT platforms, such as Disney, pull their popular titles off of Netflix to chase after the same limited home entertainment dollars.

Over The Top

It will be up to consumers to keep track of what titles are on which platforms while managing multiple subscription accounts, unique user interfaces, and how much of their privacy they’re willing to hand over with their dollars to the online services. A recent Deloitte survey indicated most consumers subscribed to a maximum of three streaming services. In the U.S. it will mean consumers constantly evaluating and juggling what subscriptions to stay with, cancel, or come back to, chasing after their favorite programming in a state of perpetual market churn.

Despite the above and perhaps even more so now, file-sharing continues and thrives in the absence of subscription services addressing the practical points of aggravation for users, which the file-sharing resolves conveniently: aggregation of content without need to relinquish users private data.

It seems certain that on-again-off-again market churn in the U.S. will be a reality for the subscription OTT platforms. Some will come and go, be sold off and resurface rebranded within vertically integrated entertainment companies and as it goes, so does its most valuable asset, its former users’ data.

It was thought that online distribution was going to kill the disc medium, however, Netflix is still in the business of renting and shipping DVD and Blu-ray discs by mail to U.S. consumers. Their prospects, however, will be focused on growing their international markets and its original programming.