The cord cutter’s dilemma

The talk of media town has lately been the “cord cutters”, the video consumers who cancel their cable bundle subscriptions in favor of streaming their favorite TV-shows and movies from streaming services such as Netflix, HBO Nordic/GO or Amazon Prime. Recent data by the market analyst firm eMarketer suggest that this cord cutting is growing faster than ever, turning more and more previous one-choice-only cable subscribers into free-for-all video streamers.

In addressing the cord cutting, both incumbent cable companies and streaming service challengers are in fierce competition to move the cord cutters to their respective streaming service, with the chief selling point being access to exclusive content. YouTube for example, will premiere its first original movies and series exclusively on their subscriptions service YouTube Red, whereas CBS recently announced it will be bringing back a Star Trek television series, with the catch that the series will only be available to subscribers of their streaming service CBS All Access.

(Original) Content is still King

To entice consumers with exclusive content, the Content Service Providers (CSPs) have spent millions and millions of dollars on what the industry have long perceived as quality content and money-in-the-bank video consumer hits, only to begin finding out the hard way that traditional and expensive content doesn’t necessarily equal popular content.

Just as the people in the children’s story, from fear of being considered fools, dared not question if the Emperor was wearing any clothes, the CSP incumbents have never questioned the truism “Content is King”. The issue with this truism though, is that just as in the story, it becomes apparent that the “King” in this case might not be wearing any clothes when questioned by someone not entrapped in the old ways of thinking.

Netflix, not hindered by legacy thinking, seem to dare to question it, as they have decided to not renew their partnership with Epix, a joint venture between MGM, Lions Gate Entertainment and Viacom’s Paramount, resulting in Netflix giving up expensive and blockbuster movie content such as Hunger games and Transformers. One would imagine that this is a decision Netflix has based on thorough analysis of their viewer data and thus reached the conclusion that rather than spending big money on what is perceived as popular content according to the old truths, they would rather invest in their own original content.

By producing its own content, Netflix gets rid of the the restrictions of geo-blocking and is in charge of when and how content is made available to their subscribers. Netflix is not alone in this, as there is a major shift ongoing where the streaming services, previously only distributors of content, now not only produce their own content, they are also producing some of the most popular content. The big winners of the latest Golden Globes and Emmy Awards were Amazon, Netflix and HBO, taking home the major awards for original content offered on their respective streaming services. It wouldn’t be too farfetched to imagine that the successes Netflix and HBO have enjoyed with original content would entice big tech players fiddling with streaming services of their own, such as Apple and Google, to follow suit, either by setting up their own production shop or buying an existing studio. Apple seems to have taken the first step in this direction as they are currently producing a TV-series in collaboration with Dr Dre to be released on iTunes later this year.

Let me aggregate that for you

For the cord cutter there really is a brave new world of different video on demand and streaming services to choose from. Choice of services is always good, but the downside from a consumer perspective is that in many cases there will be an overlap in content between the different streaming services while at the same time each service now also offer exclusive original content. Case in point are the hit shows “House of Cards” and “Game of Thrones”, exclusively available at Netflix and HBO Nordic respectively. Thus, if you as a subscriber want to watch these shows you will need a Netflix subscription and a HBO Nordic subscription. If you also can’t live without the classics, such as “The Simpsons”, you’ll need another subscription at Hulu, and yet another one at Viaplay or CMORE to watch the games of your favorite football team, bringing the total number of required streaming subscriptions to four. If not confused yet, you are sure to be when you realize that some of the streaming service’s content is geo-blocked depending on where you are in the world.

This messy and confusing market of video content opens up for the role of “aggregators” of streaming video content. These aggregators may be seen as portals, guiding video consumers to the right video streaming service depending on the content they want to see. Examples of these aggregators are justwatch.com and playpilot.com. In their current state these aggregators will tell a visitor which streaming service or services are offering the content they’re looking for, and then link the visitor to the content and relevant video streaming service. To view paid content you will however need subscriptions at each separate streaming service, and you will also need to login on the streaming service portals to view the content. This obviously limit the value of these aggregators, as they then become little more than a search engine of video streaming content.

It’s doesn’t require much imagination to see that the vision of these aggregators are to be the one-stop shop for all your video streaming appetite by setting up partnerships with video streaming services enabling access to everyone’s content from the aggregators portal. From a consumer perspective this would be an ideal solution, but it would require the video streaming services to cede the end-consumer relation to a third party and make their content accessible together with competitor’s content, something none of the streaming services probably see as desirable or even acceptable.

The more things change, the more they stay the same…

Even more quality original content is sure to be premiered in the near future, both from the usual suspects, as well as from previously unexpected players in the media and tech sector, further complicating the choice of video streaming services. In the video landscape of 2016 the cord cutters might escape having to pay premium price for a cable subscription with 50 channels (of which they only watch five), but will instead need to pay for three or four video streaming subscriptions, adding up to a monthly fee equaling, or perhaps even surpassing, what they paid for cable, and thus finding themselves back at square one.

When it comes to services, consumers will always choose the path of least resistance, and solving this dilemma should be the top priority for the CSPs and tech challengers, as I believe what’s good for the consumer will in the long run always be good for business.

/Fredrik

Fredrik is a Manager at Northstream

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