At Apple’s annual new products and devices event earlier this week, CEO Tim Cook told the crowd gathered at its Cupertino headquarters that the new Apple TV+ streaming service will be available for US$4.99 per month. Consumers who buy a new iPad, iPhone or Apple laptop will receive a year of the subscription-based streaming video service for free.
It was a shot across the bow at Disney, which recently announced at its D23 event in Anaheim, California, that the Disney+ streaming service will be available for $6.99 per month.
With its $4.99 monthly subscription fee, Apple is now the lowest of the major streaming content services — coming in at a dollar less than Hulu’s base price of $5.99 or Netflix’s basic service price of $8.99 a month.
Eighty-three percent of Americans now use at least one video streaming service, according to a recent survey conducted by ExpressVPN. Sixty five percent of respondents said they watched Netflix, while 41 percent regularly viewed Amazon Prime content, and 36 percent watched programming on Hulu. HBO Now came in at 13 percent, Showtime at 10 percent, and CBS All Access at 9 percent.
Fifty-five percent of survey respondents said they primarily streamed on living room devices, including smart TVs or set-top boxes, while 20 percent of viewers viewed streaming content on a smartphone, and 17 percent on a laptop. Just 7 percent said they mainly used a tablet.
The Value of Original Content
Movies topped the type of content most streamed, at 81 percent, ExpressVPN’s survey noted. Seventy-eight percent of respondents said TV series were the content they streamed most often. Documentaries drew 39 percent, and sports 29 percent.
Although movies topped the list, the high interest in TV series — which could include original as well as licensed shows — could be good news not only for Netflix and Hulu, which each have a large catalog of programming to complement their respective original content, but also for Disney.
Disney’s service will provide access to its vast catalog of movies, including the Marvel superhero films and the Star Wars franchise, as well as TV series.
This could explain why Apple is opting to lowball the competition with its attractive pricing. Apple TV+ will have original programming, but it is unlikely it will ever have the deep catalog of its competitors.
“They have no back catalog, while Netflix does, Showtime does, HBO does, CBS does,” noted Michael Heiss, principal analyst at 00000M. Heiss Consulting.
“Even a startup with the brand recognition of Apple might not have original content to grab people,” he told TechNewsWorld.
“Without the original content, you have a serious problem. Movies are important, but the original content is very attractive,” Heiss added.
“Original content, and specifically an exclusive library, is going to be key to the future,” predicted Erik Brannon, associate director at IHS Markit Technology.
“Right now there are plenty of options left, and a significant pay-TV base, but as that base winds downward, originals will become more prominent,” he told TechNewsWorld.
Don’t Count Out the Movies
The draw of movies shouldn’t be underestimated. Pay-TV services such as HBO originally launched just to deliver the box office experience to the home — hence the very name “Home Box Office” — and streaming of movies via services such as Netflix is what killed the video store.
The importance of movies varies a lot by services, observed Dan Cryan, principal analyst at MTM London.
“For some the importance of movies cannot be underestimated, as it is core to their value proposition, while for others the value comes from enabling binging of scripted shows, or offering live sport,” he told TechNewsWorld.
“It’s dangerous to draw any conclusions from market-level consumption to the programming strategy for an individual service,” Cryan added.
However, with a few exceptions, original series bring with them advantages that don’t translate to movies.
“Most notably, the commissioning service generally claims a larger set of the rights of their original shows than they can for movies, where the rights look a lot more like a short-term rental,” explained Cryan.
“For services like Netflix, Amazon Prime, Apple TV+, this translates to the ability to launch globally,” he noted. “By contrast, Disney+ is launching in the U.S. and a limited number of countries internationally, because those are the countries where Disney has the ability to stream its own movies. In other countries, Disney movies are tied up in multiyear high-value deals with local distributors.”
Streaming media continues to account for a large segment of all Internet traffic, but Netflix actually fell to the second-largest user of bandwidth, according to the “2019 Global Internet Phenomena Report” from bandwidth-management systems maker Sandvine. Currently 60.6 percent of total downstream traffic online is from video — up 2.9 percent from 2018.
For years Netflix has been the biggest application in terms of bandwidth consumption, notably at peak prime time hours, but it dropped to second place between Web-based media streaming apps. Netflix still accounted for 12.6 percent of all downstream Internet traffic worldwide, which is just behind the 12.8 percent of other Internet media streaming.
“For the first time in years, the http: media streaming sucked more bandwidth than Netflix,” said Heiss.
“Things started out where it was Web apps, but then Netflix took over as being the largest application to consume bandwidth, but now it is swinging back,” he added.
“This is in part because so much content is being offered directly online from various content providers,” explained Heiss.
One factor noted by the Sandvine report is that Netflix didn’t actually see a drop in the amount of streaming — other services simply have increased. Moreover, Netflix has been credited with being very efficient in terms of video-streaming and thus eats up less bandwidth than rival services.
With Apple TV+ and Disney+ entering the streaming market, the question is, how much content can viewers actually consume? There is a finite number of hours in the day, and even those who binge the latest programs can’t possibly keep up with everything!
Here too is where some services could falter, simply by not offering that must-see program — especially if the service is lacking in catalog content.
“The market can launch an unlimited number of services, but their ultimate success or failure is based upon their catalogs,” suggested IHS Markit’s Brannon.
“Look at Netflix. It will be under pressure from several new high-power entrants: Disney +, the new Apple service, etc.,” he observed.
Netflix likely will be OK in the long run because of its originals, but streaming services with a dearth of first-run content may suffer, added Brannon.
Of course the key to success is profitability.
“If content can be had cheap enough to be profitable with a few million subscribers, then a service will just carry on, business as usual,” said Brannon.
This could get more complicated, as CBS has its own streaming service, and its $12 billion merger with corporate sibling Viacom means that it will have access to the Paramount library of films and TV series.
“Then NBC has access to Universal’s library, and we could see a streaming service for those specific films,” said Heiss.
That in turn might shrink the libraries of Netflix, Hulu and Amazon in the process.
Moreover, “if first-run content is swept up in sister deals like Disney+, or AT&T TV, there won’t be much content of any real quality left to be licensed,” said Brannon. “The exception to this example is of course the WWE, who has done a great job with their originals. I think WWE’s advantage was its brand, something that the smaller streamers just don’t have.”
Where Sports Fits In
In addition to original TV series and movies there is live sports — and that could be another significant game-changer for streaming services.
The sports streamed by viewers included football at 76 percent, basketball at 67 percent, baseball at 52 percent, soccer at 31 percent, wrestling at 28 percent, golf at 23 percent, and ice hockey at 22 percent, according to ExpressVPN. It is sports that could result in a spike of Internet traffic beyond the evening prime time.
It isn’t surprising that football tops the list.
“Football is the natural leader in U.S. sports regardless of medium, and regarding weekends, the Saturday/Sunday dynamic is strategic so that viewership and ad revenue can be maximized,” said Brannon.
For this reason football could find itself in the sights of streaming services — just as networks once upped the ante to get the broadcast rights.
“Online entities are bidding successfully for NFL games. I expect this trend to continue, as well as force negotiations for online rights for renewed TV deals,” added Brannon.
Streaming of major sports could be bad news for local broadcasters, which in the cord cutting world have been left behind, apart from their ability to deliver local news and sports.
“There will always be some need for local news, but as far as sport is concerned we’re in a ‘let’s not rock the boat’ phase of evolution,” suggested Brannon.
Other traditional carriers, including pay-TV services, aren’t likely to be pushed to the sidelines either.
“The NFL still gets a great deal from DirecTV with Sunday Ticket. I don’t see this changing any time soon,” noted Brannon.
“In the more long-term future, the NFL may indeed go direct to consumer, but it has too much at this point to lose by ditching local broadcasters, national cable networks and DirecTV,” he added.
“Sports typically have to walk a tightrope between the money they can get from subscriptions — either paid directly by consumers or via a cable TV service — with the money they can get from advertising, and the need to be easily accessible in order to maintain the fanbase for the future,” said Cryan.
“Generally speaking, if everything goes behind a pay wall or moves onto a more expensive cable package, that will dent advertising and sponsorship revenue,” he added.
More Than Delivering Content
The streaming competition isn’t just about getting eyeballs to watch a program.
“Not at all — Apple TV+ is also very much a way to sell more devices,” said Heiss.
“The most telling part of the Apple announcement was not the monthly fee, but the fact that it is free with a new iPhone, iPad or Apple TV,” said Cryan.
“Essentially Apple found a way to bundle the service, at least for the first year,” he added.
“At the same time, AT&T is aggressively bundling in video with some of its mobile plans, and Amazon Prime is the bundle par excellence,” Cryan noted.
“In other words, what we’re seeing here is that video is increasingly becoming about how they add value to other products and services,” he said. “This means that in terms of subscriber numbers we are likely some way from a tipping point, as consumers will gain access to a growing number of services even if they are not heavy users of them.”