Tag Archives: Television

Is Online Streaming Finally Ready to Take Off?

The at-home experience of watching LIVE television has become more enjoyable over the years. Technology has provided us with many amenities to television including: colorful screens, higher resolution, WiFi, and even computer-generated graphics. My dad loves television, he “never wants to leave the couch” on Sundays because the NFL Red Zone experience is luxury: no commercials, access to every game, and perfect camera angles. However, many shows are no longer exclusive to television, their outlets to exposure have expanded. When my dad is not watching Red Zone on television, he is streaming from one of his mobile devices.

How People Watch Live Sports

As shown above, live streaming has become a popular way to watch sports, and this number will continue to grow with increased exposure and accessibility. However, the choice between television and live stream will result in intense competition, and could leave some broadcasting companies out of business.

What seems to have been attempted in the past has reemerged only a decade later. The first successful online broadcasting website was broadcast.com, founded by Christopher Jaeb, Todd Wagner, Mark Cuban, and Martin Woodall just a little more than 20 years ago. Broadcast.com brought television and radio to the web through innovative live streaming services, and this forced many companies into panic mode. Broadcast.com developed such a strong database of viewers that Yahoo.com decided to buy them out for over $5 billion. However, Broadcast.com would be worth nothing in a few short years due to Yahoo’s poor management. This would put a short pause on live streaming for a few years until more technology companies would grow.

Now we see the NFL and Twitter teaming up together to stream Football online, which will no doubt impact many broadcasting companies. NFL Sunday is the most watched event in America, if suddenly all of its viewers relocated, then CBS, NBC, FOX, etc. would lose profits. This is not only happening in sports, even services like Netflix, Hulu, and YouTube are diverting attention away from television. In addition, the internet is being updated so frequently, it is almost impossible for television to keep up with internet content.

The Frightful 5, aka the leaders of digital transformation, will impact broadcasting companies as well. Services such as Amazon Prime Video, YouTube, Twitch, and Facebook Live, all pose serious threats to television companies. It is nearly impossible to stop this shift from television to streaming, because unarguably these services provide us with more efficient ways to digest information quickly.

There is nothing that can be done to stop these tech companies from beating their competition, but we can keep them from expanding too large. If these companies become too large, it can be dangerous the amount of control they possess over the market. Overtime, television will need to become more digitally interactive if broadcasting companies want to survive.

Disruption Occurring in the Media and TV Industry

Throughout the entire semester, we’ve detailed the disruption of the media and television industry. From the rise of video giants like Blockbuster to their ultimate demise, we’ve seen how seemingly untouchable businesses can fall victim to disruption. The current landscape shows mainstream use of online streaming services. These platforms provide consumers with not only more convenient options, but increased offerings tailored to viewer preferences. With the widespread adoption of these services, along with other platforms that offer services similar to cable at a cheaper price, more consumers than ever are cutting the cord.  Watch a summary of our findings below:

 

To learn more about the processes and programs we used to facilitate our learning, click here.

Here’s our take on how to adapt to these disruptive times in the media and television industry.

 

Before there was streaming, there was cable

It’s really obvious to trace the disruption of the media industry to Netflix and similar streaming services. Everything was perfectly fine before that, right? It is so easy to ignore the fact that disruption began long before Netflix became mainstream; it began with the growth of cable television.

First, let’s clarify the distinction between broadcast television and cable television. Broadcast television consists of NBC, ABC, CBS, FOX and to an extent, CW. These channels have the largest reach in terms of viewing households, the standard by which reach is measured for television. It is also a very diverse audience that watches, they are measured in terms of the number of adults between the ages of 18-49 watching a program. In terms of how an advertiser chooses to spend their dollars, broadcast channels are sort of a necessity, but may not always be the most efficient use of money. These commercial spots are often tens of thousands of dollars each, if not more.

Cable television however is much more niche in their viewer composition and in the type of programming they offer. Cable TV allows advertisers to reach a more targeted market due to the nature of their programming. The viewers of these channels can be guaranteed on bases such as women between the ages of 25-49 or men between the ages of 18-34.

In addition to allowing advertisers to spend their more dollars more efficiently in targeting, the cost per commercial spot on cable television is significantly cheaper than its broadcast counterparts. So while the reach of cable television may not be as great, it a lot cheaper and a lot more efficient in terms of advertising spend.

There are hundreds of cable channels available to viewers; and because of this, viewers have hundreds of options when it comes to choosing what to watch. The increase in available cable channels has fragmented viewers and ratings alike. There is an ongoing competition between the networks to put out the best programming to attract viewers to their network. There is a big push for fresh, new programming every new season, and this has led to more failed freshmen series for each network. It is rare for a TV series to achieve lasting success in such a competitive landscape.

Cord Cutting, the Demise of the Cable Industry

As we have been discussing throughout the blog, the world we live in is being rapidly disrupted, and the TV and cable industry is not immune to this as people are “cutting the cord” and moving away from cable.  There have long been alternatives to cable, but now they are finally becoming practical and affordable to the general public as people are tiring of being bullied by cable companies by being charged obscene prices for, most of the time, bad service.  This has led to the cord cutting generation canceling their cable subscriptions and moving to cheaper alternatives to watch their favorite shows.

Services like Chromecast used to be considered a luxury, but now that they had added more selections and become more affordable, these services are becoming more and more popular.  Adding Chromecast to your home for $35 along with a few other complimentary services that fit your viewing pleasures can still save consumers hundreds of dollars each year, as the average cable bill comes in around $65 per month.

On top of Chromecast, Netflix, and Hulu, Apple TV is in the midst of launching a “cable-killing app.”  Apple is currently negotiating with CBS, ABC, NBC, FOX, and each of their local affiliated networks to get the rights to each of their live TV streams.  Subscribers to Apple TV will also be able to receive their favorite channels, including ESPN, Discovery, and Disney, just to name a few.  Apple will also have HBO available, allowing them to cover almost every possible platform consumers currently pay the cable companies for.  This is the first time that a “cord free” service will be able to offer live sports, separating Apple TV from the rest of the industry and putting the cable industry in serious jeopardy.  Apple is currently in discussions with the NFL along with Patriots owner, Robert Kraft, to give Apple the rights to broadcast live games on their app.  Currently, Apple TV has the rights to offer NFL Game Pass to subscribers which offers live out-of-market preseason games, as well as all regular season games available the next day, on demand.  If Apple can continue negotiations and get the rights to broadcast live NFL games, similar to Yahoo’s free international broadcast of the Buffalo Bills vs. Jacksonville Jaguars game in London this past weekend, the cable industry will struggle to survive that blow, as Apple TV subscriptions again fall well under the $65 per month consumers pay for cable.  However, until this happens, cable companies still have a huge advantage when it comes to the sports fan because there is not a cord free service that currently offers every option of live sports that viewers can get through cable.

With 12.3 million households, or 11% of television watchers are using cord free broadcasting, investors are beginning to have shaky confidence in the media industry.  Analysts at Goldman Sachs still believe that currently, cable tv is a sound investment, but is becoming much riskier with the advancement of cord cutting and the emergence of the plethora of alternatives consumers can switch to.  These alternatives can be combined to form affordable, inclusive television packages that can cater to each type of viewer and are still cheaper than cable and can be seen in the video below.

 

With all of theses alternatives, cable companies need to learn from past disruption, like Blockbuster, to avoid acting once it is too late and all of their customers are gone.  Cable companies need to act quickly to lower their profit margins, so prices can be lowered and services can be improved.  By lowering prices and upgrading their services to provide better quality as well as features similar to Netflix and HBO, the cable companies will be able to keep all of their current customers and avoid the collapse so many other industries and companies have seen because of disruption.

The Impact of Original Programming

With the rise of streaming services such as Netflix and Amazon Prime Instant Video, consumers have been exposed to new, innovative programming from these providers. These original programs are created exclusively to air on that platform and be viewed by its subscribers. This breaks from the traditional model of shows airing on broadcast or cable television, and later being put on the streaming service after each season has aired. Programs like Orange is the New Black and Transparent have not only captured large audiences, but have also been nominated and award several awards traditionally reserved for traditional television programs. Just this past year, Orange is the New Black was nominated for three Golden Globes awards and for three Primetime Emmys. Uzo Aduba, a supporting actress in the series, won a Primetime Emmy for Outstanding Supporting Actress in a Drama Series. Transparent, an Amazon Original, won two Golden Globes, five Primetime Emmys, and was nominated for an additional six Primetime Emmys. Between Netflix and Amazon Prime Instant Video, the two took home a total of 46 nominations for Primetime Emmys. This demonstrates how original programming on streaming services are starting to contend with traditional television shows airing on broadcast and cable networks. Within just a few years of introducing original programming, streaming services have gained major traction with their shows.

Traditionally television networks and their programs have been guided by ratings of its shows. Nielsen data is used track the number of households watching a particular program, and this information is used in accessing not only how successful a show is, but how to price the advertising space in that program. Since there are only a limited number of primetime spots in each network’s lineup, there is high pressure to have high-rating shows in an effort to maximize advertising revenue. This has led to an extremely fragmented industry with new networks popping up in an effort to achieve a piece of the success. TV critics have begun to call this era the “Golden Age of Television” due to the amount of new, original programming that came out this year. Broadcast and Cable networks aired just over 300 original programs this year, compared to 24 from the streaming services. With the influx of new programs and competing channels, the ratings for individual shows continue to drop each year. This has also made it extremely common for new programming to fail within the first season due to lack of sufficient ratings. Viewers are overwhelmed with choices, and the decreased ratings show that. Along with decreased ratings comes less advertising revenue for the networks as well.

The advantage streaming services such as Amazon Prime Instant Video and Netflix have is that they are able to create content that appeals to viewers, rather than advertisers. There is no longer the constant worry of having to achieve sufficient ratings for a show since the providers aren’t reliant on advertising revenue to sustain themselves. Instead, the streaming services are able to produce shows that consumers are interested in. Netflix uses user data to not only help to serve customers, but to also find out what customers are interested in and produce original content that appeals to them. This has led to Netflix having an extremely high success rate in their original programming. Having consumer centered content has also turned into an integral way for Netflix to retain current customers. Ultimately, Netflix and Amazon Prime Instant Video are focused on gaining and maintain subscriptions. The popularity of their shows does not matter as much to them as does the engagement of the viewers. Reed Hastings, the CEO of Netflix, has declared that “Netflix company isn’t interested in the ratings of its original – or licensed – content.” This model allows streaming services to provide content that caters exclusively to the viewers desires. Traditional networks do not have the flexibility to change their model and keep up. Networks are still reliant on ratings and held responsible by advertisers.

Of course, where there is success, other players tend to come into effect as well. The latest rumored company to enter the field is Apple. While there is not much information out yet, there have been reports of Apple meeting with Hollywood executives to discuss creating original content.

Original programming from streaming services could be the incentive that consumers are looking for to finally cut the cord of their cable subscription. With consumer tailored content, and not being reliant on advertising revenue, Netflix, Amazon, and soon Apple are poised to exploit the cord-cutting market.

 

In the next post, we will discuss “cord-cutting.”