In March 2015, Time Warner announced the launch of a separate HBO streaming subscription service that would differentiate itself from cable operators. Shortly thereafter, CBS launched a "allaccess" service with a subscription fee of $5.99 per month, and subscribers can watch live broadcasts of local stations through their websites and mobile apps, the current series of all-season episodes (which can be viewed in the subscription service after a day of TV broadcasts), and the like Star Trek (Star Trek) and "Cheers Bar" (Cheers) and other classic episodes of the past.
Other companies are likely to follow suit. "The split streaming subscription service shows that media companies have realized that multiple distribution channels allow consumers to get the version of the TV content they want." "These initiatives help broaden the audience," said Eric Bletterau, a professor of marketing at Harvard Business School. ”
Cardick Hossennagh, a professor of operations and information management at Harvard Business School, points out that media companies, especially pay channels like HBO, have come to the point where they have to find other options. "They are letting the profits slip, especially the young users who are constantly moving from cable subscriptions to online streaming subscriptions, and it's time for them to seize the demand to make money." ”
But what about the personal subscription options, which we know about Internet TV (over the Top,ott), that will lead the industry and consumers? Currently, the typical OTT subscription program is Netflix's streaming service. By paying a monthly fee, users will be able to watch Netflix's original program, such as the Women's prison (Orange is the New Black) and the house ofcards, as well as a large number of copyrighted film and TV content.
Netflix has always focused its marketing and growth on internet streaming, even though it also has DVDs and Blu-ray mail services. This competition means that HBO, CBS and other media companies will have to look for alternative sources of revenue and distribution channels that go beyond traditional cable-TV operators. "We're in a very strange state with television and it's hard to say what it's going to become. "Overall, we're moving towards a new way of providing TV programs, and everything can be seen online," said Sandra Hill, a professor of operations and information management at Harvard Business School. ”
For years, Netflix's CEO, Ride Hastings, has reedhastings that HBO could be its biggest competitor. Following HBO's announcement of streaming subscription services, Hastings and Netflix's CFO David Wells (Davidwells) said in an open letter to investors on October 15 that HBO's Internet subscription plan was "inevitable and sensible" and " Many people subscribe to Netflix and HBO at the same time because we have different programs. "As consumers turn to internet TV," Hastings and Wells added, "Two companies are likely to flourish."
Kevin Webach, a professor of law and business ethics at Harvard Business School, agrees with Kevinwerbach. "Netflix and Amazon have proven that streaming mode is going to work. Netflix is investing heavily in the creation of original programs to confront the HBO front. "Everyone in the media industry knows that the Internet is the future distribution platform, and that the major players have made arrangements to protect their own interests," Webach said. ”
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Soon after HBO's CEO, Richard Plepleux, announced the launch of the Internet subscription service, the industry richardplepler a lot of questions and speculations about the economy of the program. Plepleux called the service A "change", but neglected to mention a lot of details.
"There are 10 million households using broadband in the United States, and this figure is expected to grow." About half of the existing 10 million families subscribe to streaming media services. These consumers are not being watched by HBO. We should not miss this ever-increasing opportunity. "We will work with our existing partners and explore new models with our new partners," said Mr Putin. Overall, there are currently about 80 million families without HBO, and we will do everything we can to win these audiences. ”
The Wall Street Journal (Wall Street Journal) subsequently reported that the HBO streaming media subscription service would be priced at less than a cable subscription, around $15. HBO's goal is to attract the so-called "cordcutters", those who have only broadband connections and no cable TV. HBO can also pack and sell Internet subscriptions to wired broadband partners. If HBO can persuade 4 million of users to pay $15 a month to subscribe to streaming services, it could generate an additional $500 million a year, FBR analyst Bartoncrockett said in a study.
Plepleux's collaboration with partners suggests that HBO will not exclude cable operators. "Cable operators will not allow HBO to do any online distribution that could seriously threaten their source of income. "But now, the source of income from broadband (Internet services) and the source of revenue from video transmissions can be almost equal," Webach. So HBO's launch of Internet subscriptions is not necessarily a threat, especially for families who buy cable companies ' broadband services. Cable operators have lost revenue and program costs, but it still has a large number of other programs, including sports programs, to keep subscribers. ”
CBS announced plans to include more details, but analysts questioned their attractiveness. CBS receives $5.99 a month and users can watch subscriptions on networked devices. Geo-positioning allows users to watch local news programs. The catch is the new CBS program content, no more than HBO programs, not to mention providing wireless services to consumers with digital receivers and converters, Gabelli analyst Brettharriss said.
Analysts refer to CBS's subscription service as the HuluPlus of the broadcast network itself, noting that its Internet subscriptions are more of an insurance policy to prevent viewers from leaving their cable subscriptions too quickly.
Can bundling last long?
The initiative to launch an independent subscription service simply reflects the competitive landscape of today's television industry. The practice of CBS or HBO may spur other broadcasters and cable networks to launch their own subscription plans. If media companies are creating their own subscription services, the existing channel bundle system may be in trouble when it comes to a separate cable TV channel subscription: Why would cable companies pay for the broadcast network if their content is no longer exclusive?
Needham analyst Martin (Lauramartin) questioned CBS ' arithmetic capabilities. "We don't understand that. CBS loses $1.5/month for every family that closes a TV channel bundle with a $6/month subscription to a new CBS service, while the rest of the TV show will lose $40/month. "said Martin. These figures are the amount that she estimated the cable companies paid monthly to TV show owners. The risk, she adds, is that CBS has shaken the TV channel bundle and lost money.
Bletterau predicts that the end of the cable bundle system is only a matter of time, and more and more consumers will abandon their choice of bundled pricing options. Cable operators may have to cut prices, but they can win more users with a more customizable model. Media companies can also get more direct access to users through subscription schemes. The pricing of these initiatives "will result in a reduction in revenue from each user, but will have a broader user base." "I think that in the long run, gross income is likely to increase," Bletterau said. ”
However, Hill does not agree with this view. "The result of a TV bundle is that you get what you want, but you also get a bunch of things you don't want. By paying a subscription fee, you end up paying for what others want, and vice versa. Then the wealth was allocated to the various channels, but more people were happy. "Everybody's got the benefits," says Hill. Unless the price is down wildly, how much you pay and what you get. Consumers and frequent channel switching can be a disadvantage. ”
At the same time, smaller cable networks may be difficult because they do not have pay-TV channels or sports to entice consumers into buying cable companies ' subscriptions. If consumers only choose and pay for what they want, the fledgling television network may be harder to get viewers. "The number of viewers who have unplugged cable lines in the last few years has remained at a low level, mainly due to sports channels such as HBO and ESPN. With HBO on its own, this is bound to put more pressure on cable companies. "I think if this spin-off trend goes on, it could affect a lot of small channels," Hosanagar said. In an environment where everything is independent and there is a giant like HBO, the survival of many small channels will become very difficult. ”
If the TV bundle disappears, some consumers will benefit, but most will suffer, Webach said. "The history of pay-TV in the United States has always been more and more consumers, but more and more pay. Today's cable service is much better than it was 15-20 years ago, but it's also more expensive. "So far, OTT services such as Netflix and Amazon Instant Video (Amazoninstantvideo) have only increased consumer spending on video service providers," Webach said. It's also hard for me to imagine that consumers will spend less on HBO and other TV program providers that are launching their own subscription. ”
TV bundles will continue to exist, Webach explains. First, the media and cable television industry will not tolerate a sharp decline in revenue. And it is unclear whether subscription TV pricing is actually feasible, he added.
Improve target positioning
But new business models are likely to emerge, Hill said. These moves will reshape the media economy, not limited to TV bundles and cable TV fees, she added.
"From the point of view of the TV network, the introduction of independent subscription services makes it easier to target users and conduct marketing." "Perhaps the result of unbinding will reduce the number of viewers, but Internet subscriptions can attract advertisers," Mr Hill explains. ”
For example, cable television provides some visible data for media companies, but ratings have historically been published by Nielsen's panel of Nielson. It's hard to keep track of how often people watch TV on devices like TVs, smartphones or tablets, Hill said. Over time, the purchase of internet and television advertising may begin to fuse together.
Like CBS, which moves TV shows through subscription mode to the Internet, media companies can track consumers through multiple screens. "The ability to know clearly who is watching shows will only benefit advertisers," he told him. "Now, Nielsen ratings provide family-level data," says Hill. As viewers move toward the internet, the model will change. ”
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