MAD Perspectives Blog

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 Snip Snip - Hooray!?

Peggy Dau - Monday, October 20, 2014

At last. Premium content without having to have a cable or Pay TV subscription. Bowing to consumer demand, HBO and Showtime will offer access to their programming which includes the wildly popular, Game of Thrones, and critically acclaimed, Homeland. For those who have never subscribed to premium cable channels, this an opportunity to play catch up. But, more importantly this is the seismic shift that has been forecast since the rise of OTT services (streaming content over your broadband connection).

The benefit to HBO and Showtime is access to incremental revenue. Millions of households don't subscribe to their services which are priced as a premium over and above the selected Pay TV subscription bundle. There have been options for individuals to access this content via tablet based-apps, HBOGo and Showtime Anytime, using household or family member passwords. And, others have waited for series to be available on OTT services such as Netflix. Studies have shown the popularity of the content whether accessed on a tablet/laptop or using internet connected devices like XBox. We can expect an avalanche of other streaming offers to come from the rest of the cable channels. The difference now, is that fans don't have to wait top play seasonal catchup, nor do they need to "borrow" passwords. They can subscribe directly to HBO or Showtime, without an intermediary.

The announcement is timely given the recent reports from ComScore and Ooyala reinforcing where and how we consume content. The all important millennials (ages 18-34) consume ⅓ of their original series content on digital platforms. Why? Flexibility of place and time. The millennials are also much less likely to subscribe to cable or other pay TV services. An argument could be made that millennials don't have the income levels (particularly at the lower end of the age range) to support pay TV subscriptions. And, that others ARE subscribing and that they represent the majority. So why are millennials the driving force behind new business models? They represent the future and the habits they have and are forming today will stay with them. Like the publishing and music industries, the television industry is in the midst of a dramatic shift.

The shift is not due to a lack of interest in televised content. It's about the audience taking control of the schedule, and as a result the business model for accessing desired content. Approximately 40% of US households already have a paid digital video subscription via a service such as Netflix or Amazon. The success of these services has been debated even as subscriptions have risen thanks to the availability of original content or not grown as quickly as anticipated in new markets. Whichever side of the debate you may sit on, the adoption of streamed content is here to stay. Subscription plans and budgets will determine the uptake rate. 

Consumers are hopeful for options that allow them to maintain or reduce their existing TV-related costs, while gaining access to previously unavailable programs. As mentioned in my recent blog, Alternatives to Content Socialism subscribers have grown tired of cable bundles that include channels with content of little or no interest. The home audience isn't ready to give up its cable subscription. It simply wants options and flexibility. Even with broadcast TV viewership declining, the core U.S. networks, ABC, CBS, NBC and FOX, deliver must-see TV in the form of sports. These networks already provide live streaming alternatives, but it's the big screen experience that continues to bring fans together at the appointed game time.

No pricing for the streaming services has been shared, yet, by HBO or CBS/Showtime. When it is revealed, it will become clear as to how well these content creators understand their audience. There is a tipping point when it comes to pricing. They've shown they understand the shift in how consumers want to enjoy content. Do they also understand the value placed on that content in terms of monthly subscription pricing? Only time will tell and what seems like cause for celebration, may result in dissatisfaction.

What's your perspective?