It’s all-out war in the world of premium video. In the mad “cut the cord” dash of consumers away from pricey cable TV bundles that cost just over $100 monthly on average in the U.S., the subscription video on demand (SVOD) land grab is on. Netflix, Amazon Prime Video, Hulu – those are our top 3 SVOD choices in the U.S. right now. But soon those SVODs will be joined by Disney+, Apple TV+, and AT&T’s HBO. And, don’t forget about countless others like CBS All Access and Showtime. All of this begs the question, how many subscriptions are consumers willing to buy to get their monthly video “fix”?
Let’s take that $100 cable bill (that you hope to cut) and do the math. And, let’s assume you need to save at least $20 to justify ditching the convenience and familiarity of having every possible channel and all things in one place in this new a la carte video world. Your $100 is now reduced to $80.
Now, consider this. Neither of the top 2 SVODs (Netflix and Amazon Prime Video) gives you live television (news and sports). Hulu offers those live channels, but only if you pay $45 monthly (YouTube TV charges about $50 for that privilege). So, whether you are a cord-cutter or “cord-never” (those, like most millennials, who never subscribed to cable packages in the first place), if you want live tv (including ESPN), then first subtract Hulu Live’s price from your $80 video bank account. That leaves you $35 for everything else.
How will you spend that $35 in a world awash with competing SVODs? Most of us – at least for now – will hold onto our Netflix. After all, we almost all instinctually dutifully pay our $12.99 monthly (150 million of us worldwide). That means our $35 is now down to $22. But as I recently wrote in Forbes, Netflix increasingly features less of what originally drew us in, as major studios like Disney and WarnerMedia increasingly take back their content (like the Disney princesses, Friends) to keep it exclusively for themselves when they launch their competing SVODs. If those and other titles matter to you, Netflix isn’t enough. Door #2 it is.
Disney+ is well positioned here to be that second home. Disney+ will exclusively feature not only those beloved Disney princesses (family-friendly evergreen content that is essentially deeply engrained in our cultural DNA), but also its other crown jewels now out of reach for Netflix and all others — including the Marvel, Pixar, Star Wars holy triumvirate. Let’s face it, our kids demand that Disney content. For our part, we happily oblige them to give us some much-needed peace and quiet. Disney+, for this reason (not to mention Disney’s omnipotent and relentless marketing machine), will immediately attract millions of subscribers when it launches. CEO Bob Iger essentially guaranteed that when he smartly (perhaps even diabolically) priced Disney+ at a “how can I resist” $6.99 monthly price (Disney also recently announced a $12.99 Disney+/Hulu/ESPN+ bundle, which I discussed in an earlier article in Forbes). Entry into Iger’s new SVOD magic kingdom means that $7 must be subtracted from your remaining $22. You now have about $15 for everything else.
But wait, you haven’t even considered upcoming Apple TV+ and HBO Max yet, not to mention CBS All Access, NBCUniversal’s upcoming SVOD and all the others! We don’t yet know Apple TV+’s pricing (my guess is that it will mimic Netflix pricing), but HBO Max — which will feature HBO plus WarnerMedia’s vast universe of film and television content — will likely cost $16 or more since stand-alone SVOD HBO Now already costs $14.99 monthly. That means that if you want HBO (as many of you did during the halcyon days of Game of Thrones) – not to mention other valuable WarnerMedia franchises like Batman and Friends — your remaining $15 is gone and your Apple (TV+) wallet is empty. You have either already reached or exceeded your monthly video budget and are essentially no better off than you were in the cable and satellite days of yore.
That’s the daunting reality that faces all of these mega-SVOD contenders — how to break out amongst the evergrowing pack and at least become your third SVOD choice. Three seems to be the breaking point at which the cost of these newly fattened “skinny bundles” is perceived to be too high (that’s why some, like Viacom with Pluto TV, have chosen an entirely different subscription-free advertising video on demand path). The strategy du jour for all SVOD combatants to win on this increasingly crowded playing field is to develop and feature content franchises that we can’t find anywhere else. And, even if that strategy works to draw us in, the trick is to keep us there — glued to their exclusive programming. We won’t move so long as we’re hooked on shows like Stranger Things (Netflix) or Game of Thrones (HBO). But once those shows are gone (Game of Thrones anyone?), panic sets in. All bets are off.
Perhaps Disney – with the most valuable content franchises on this planet – is least vulnerable to customer churn. Deeply-pocketed Disney also can withstand downward pricing pressure in a way that Netflix can’t. Amazon also is relatively safe, because it plays under entirely different subscription rules. Nearly 60% of the U.S. population reportedly considers Prime membership to be an absolute necessity as a result of Jeff Bezos’s mystical powers. Amazon “generously” throws in Prime Video for free simply to entice us to shop, shop, shop.
But for the rest of the SVOD world, it’s become a very scary place. Even seemingly invincible Netflix, isn’t. Netflix shed U.S. subs for the first time in Q2. We are fickle creatures after all, not to mention highly suggestible ones who listen to the programming choices of our friends. And, it costs us nothing to cancel a monthly SVOD plan and sign up for someone else’s. Switching costs are $0. We don’t need to wait for the cable guy anymore.
Good for us consumers. Not so good for those SVODs that don’t make the cut and at least take home the bronze.
[For a much deeper discussion of today’s SVOD wars amongst giants, read my latest book “Fearless Media”.]