Content Fragmentation and Consolidation

[Haywood]

During the birth of streaming, massive amounts of content were consolidated in just a few providers. Content owners were okay with the licensing deals that made this possible, because streaming was still just a niche market. As things heated up and people began to embrace streaming in larger numbers, content providers realized that they needed to monetize streaming in a big way in order to survive. This led to an exploding number of new streaming providers with the market fragmenting out to approximate what ad hoc cable TV would look like. I see this trend continuing for awhile.

The problem with the ever-fragmenting streaming market is that consumers have a limited number of dollars they are willing to spend on content and the cost of content is rising steadily as programming spreads out across an ever increasing number of services. Faced with $5 here, $10 there fee structures, people will be forced to pick and choose the content they care about most. This will probably drive down the price for less popular content and probably put an end to some niche programming. The other possibility is that content owners will start consolidating content again in order to be able to use premium content as leverage to sell niche content and then we will be back to something more like what we had with a handful of big services.

Thoughts?

 

[Flint]

I think we are working our way towards a pay per view strategy for the content providers. It will require several things to happen first:

1. Consumers must be willing to pay for every single thing they watch every single time they watch them.
2. Content owners will have to get comfortable with a revenue model which is directly tied to consumption with fewer guarantees of income prior to release of the content
3. Content providers have to be willing to change their business models so as to take more risk on their customers.

I envision a world where I may subscribe to a service, like ROKU, Amazon Prime, or Netflix, for a dollar or two each month, then for every piece of content I watch I pay a few cents. I may watch Season 1 Episode 8 of Lady Dynamite, "A Vaginismus Miracle," on Monday and pay $0.05 to for it, then my wife may watch the same episode on Tuesday and pay the same $0.05 to see it. By the end of the month, I may pay between $8 and $15 for all the content I watched, but I am paying more and I am comfortable with it because I only paid for what I want to see, other than the small fee for being a member of Netflix.

Once we get to that model, the content owners could potentially strike deals with the content providers where, perhaps, Amazon gets each new episode of a popular show first and Amazon can charge $0.10 for each view for a two months, then after that any content provider can show it and they all charge $0.05 for each episode.

I could subscribe to 10 of the content providers at $2 a month, paying a total of $20 a month for the opportunity to then watch whatever they have available at $0.05 to $0.25 per show. In the end, I could be paying more each month, which is good for the industry, but I will be willing to do it because I choose to pay each time.

This also leads to true demand based pricing. I would be willing to pay more for a show I really want to watch versus one I just maybe think I could watch. Some of the providers could get catalogs of stuff really cheap to charge a penny per view and over the course of three years make a decent profit off them.

 

[Towen7]

I respectfully disagree. I don't think consumers will ever agree to pay for content on an as-consumed basis. Content providers will need to find other ways to monetize their product, probably through extremely target advertising.

 

[Flint]

I agree that it will be a challenge to reach critical mass on a pay per view approach, but Amazon Video, iTunes, and Google Play are making a pretty darn good living on "rentals", or time-limited access to content. Considering they are typically charging between $2.99 and $14.99 for the "rentals," I could see a change in mentality towards paying per view each time.

 

[Akula]

I think the answer is people will learn to become OK with not having access to all content. If it's too expensive for me to subscribe to services that place everything I might want to watch at my fingertips, then I will prioritize. I'll choose the ability to view Cardinals baseball over having all the NFL available. I'll go for the ability to watch Doc Martin and Better Call Saul over This Is Us and Saturday Night Live.

I'm not sure people will go for PPV, mostly because I don't think the costs will end up low enough to be reasonable. As Flint points out, movie rentals are usually in the $3 range. I *highly* doubt we'll see per-episode costs of less than a buck. And when faced with the question "Do I want to spend $1 to watch this episode of Miami Vice?" I'm going to say "Nope." I'd rather pay $20/month to have access to the full show run as well as a bunch of others over paying $12 just to watch the 12 episodes I actually do watch- even if it's a better financial deal, it just doesn't seem as good a deal psychologically.

 

[Towen7]

Time will tell. Does Amazon, Apple or Google publish their PPV revenue? I don't know anyone who accessed PPV content more than a few times a month and usually only to supplement other sources or to have digital content while traveling.

 

[Haywood]

Another factor that dovetails with this is that I think we need a better way to aggregate content. Universal search is a start, but right now, my content is stuck in a bunch of silos. When I want to decide what to watch, I have to go into a bunch of different apps to see what's available. I might browse Netflix, then try Hulu, then Amazon before moving on to my libraries in Plex or Vudu. Somewhere in here someone is going to negotiate API level access to a bunch of these services and provide a common integrated UI. Plex is allegedly already working on it and I'm sure they are not alone. I think segregated apps are just an intermediary step along the way to someplace else.

 

[Towen7]

I've been begging for that for years. And it's one of the reasons I prefer to stick to one or two primary sources for content.

 

[Haywood]

I've been begging for that for years. And it's one of the reasons I prefer to stick to one or two primary sources for content.

The pathetic thing is that it is very easy to do illegally and basically impossible to do legally. I should clarify. It is simple to set up a fully automated system that will download, tag organize and present every episode of any TV show you want without ads in a beautiful user interface regardless of what source it comes from. There is no way to do this legally.

 

[MatthewB]

I think we're heading this way with Dish offering SlingTV and AT&T and Directv just announcing they have their own internet only streaming 100 channels for 35.00 each month. Not sure if that's constant or an intro price only but as you no longer have to pay a monthly fee for devices "rented" or "insurance" or needing a sat dish it should keep costs down. The next year should be interesting