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Streaming Won't Make Up for Cord-Cutters, Says AnalystSubscribers of video streaming services are extremely price-sensitive, according to recent analysis from research firm MoffettNathanson LLC . This should be a concern for pay-TV providers hoping to compensate for lost pay-TV revenue by launching new streaming services. (See Will the 'Slim' TV Business Model Really Retain Cord-Cutters? and TT Poll: Slim TV Targets Millennial Devices.) In a report released yesterday, MoffetNathanson found that streaming services needed to be very aggressively priced to attract users, because interest in these services dropped off sharply as prices rose. The research firm's analysis was based on a survey of 5,000 US consumers by Altman Vilandrie & Company . Two streaming services that are due to be launched in the next few months were reviewed, from Hulu LLC and AT&T Inc. (NYSE: T). The analysis found that a bundle of broadcast and cable channels distributed by Hulu and priced at $20 per month would be able to get 16.6% of the total market. However, if the same bundle was priced at $55 per month, it would only be able to get 2% of the market. MoffetNathanson also estimated the per subscriber carriage fees (paid to channels for the right to distribute them) at about $40. At a $40 price point, the curve yields a market penetration of 6.5%, but that does not take into account other costs for the service provider, such as storage and distribution, marketing, customer care, etc. So the only viable pricing for this service would need to be more than $40 per month. Analysis of those willing to subscribe at those higher prices unearthed another challenge for service providers. It's not cord-cutters or cord-nevers (those who have never subscribed to pay-TV) who make up this category; it's current pay-TV subscribers. In fact, it is subscribers who are paying more than $100 per month for a TV subscription and are looking to cut down their TV spend. If a pay-TV provider was to offer such a service then, it would be transitioning a $100 per month customer to a $40 to $50 per month service. Clearly, that isn't much of a strategy. However, MoffetNathanson's analysis listed approximately 75 channels for the Hulu service, and 100 channels for AT&T's soon-to-be-launched DirecTV Now streaming service. These channel lists are based on press reports and market intelligence gathered on each company's upcoming offering. But these channel line-ups are not "skinny" by any means. And I'm not sure who they are aimed at. For Hulu, this approach would at least make some sense as it has no legacy pay-TV subscriber base to protect. But for AT&T, a 100-channel streaming service would seem neither here nor there. I would think that a pay-TV provider would look to create a package targeting the 18 to 34 demographic, aimed at being complementary to Netflix, Amazon, etc. It would need to offer a considerably smaller set of channels, more in the range of 20 to 30 or so. And it would need to be priced considerably lower, certainly closer to the $20 to $25 price range rather than $45 to $50. That is far more likely to attract the right group, i.e., cord-cutters and cord-nevers, rather than cannibalize its existing pay-TV subscribers. I accept it may be a challenge negotiating for the specific channels this segment would want, and licensing them at a viable price. But to me it seems a far more practical approach for a pay-TV provider exploring streaming services. — Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation |
Contentious issues that are likely to fuel lawsuits and angry blogs in the coming year.
Content producers are unhappy with the advertising approach and revenues they are getting on Facebook Watch.
OTT video usage is driving the penetration of various Internet connected devices to help view online streams on the larger TV screen.
Major Hollywood studio to trial 'virtual' movie theaters using head-mounted displays.
Network technology vendor Sandvine has found that piracy isn't only hurting network operator profits – each pirated set-top box is also using up 1TB per month in 'phantom bandwidth.'
On-the-Air Thursdays Digital Audio
ARCHIVED | December 7, 2017, 12pm EST
Orange has been one of the leading proponents of SDN and NFV. In this Telco Transformation radio show, Orange's John Isch provides some perspective on his company's NFV/SDN journey.
Special Huawei Video
Huawei Network Transformation Seminar The adoption of virtualization technology and cloud architectures by telecom network operators is now well underway but there is still a long way to go before the transition to an era of Network Functions Cloudification (NFC) is complete. |
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