Premium
Cable: How the industry is Changing and Competing in world filled with
streaming
Television
has been dominate for most of the 20th century, however, the
presence of new media has infringed on its success and has started to be phased
out by alternatives. Numbers suggest that streaming and over-the-top services
have taken up a share of the television market and consumers are now beginning
to forego cable services for different platforms. However, not all subscription
cable may be at as much risk. For decades premium cable networks have
differentiated themselves from basic cable and the demand for their programming
may be their saving grace.
Premium
cable launched for the first time in 1972 when Time Warner Company created the
subscription based channel HBO. Subscribers could receive the network for an
additional fee. Eventually, Showtime, Starz and Cinemax networks were also
created as competition. (Funding Universe)
I would
argue that premium cable networks can be defined by several characteristics.
First subscribers do not view advertisements during programing since costs are
covered by the subscription; between shows the networks may run promotions for
other programs. (Pisharody) Premium cable also generally features “edgier” content.
Since premium cable networks do not have to abide by the same rules as basic
cable networks many of it shows contain profane language, nudity and other adults
themes.
A study
conducted by Business Insider suggests
that TV providers are beginning to see their worst years yet; it reports that
in 2013 all major providers saw a decrease in TV and internet subscriptions. It
also states that between 2010 and 2015 around 5 million consumers have
cancelled their subscriptions to cable and internet. (Edwards)
However,
while the future of television may be very grim for basic cable networks, this
may not be the case for premium cable yet. Premium cable still appears to be
very popular and in demand, even in its traditional form. Forbes reports that Time Warner (HBO’s parent company) saw increase
in revenue and an increase in subscriptions due to popular programming on the
network. (Forbes) HBO currently has around 43 million subscribers in the US and
around 127 million worldwide. Forbes
also reports that “The subscription
revenues have grown from $2.66 billion in 2008 to $3.41 billion in 2013.”
(Forbes) Premium networks such as HBO also have considerable market penetration;
in 2013 HBO was available in 41% of households which paid for cable. (Forbes) Likewise
other premium networks saw increases. At the beginning of 2014, Starz reached
22 million subscribers while Showtime reached 23 million, both small increases.
(Variety)
This considered it appears that premium cable is keeping up well
enough for the time being, even as basic cable subscriptions decline. However,
premium, networks have begun to adjust as more consumers move to internet
streaming.
What Are Premium Networks doing to Stay
Relevant?
One way
premium cable networks are still viable is by licensing the rights of some of
their older content to other providers. Using the network’s catalogue of older original
series, premium networks are creating deals with VOD providers to have their
content available to stream. Recently, Starz made a deal with Amazon to have
its show The White Queen appear on
the service and has also made its series Spartacus
and Magic City available to Netflix subscribers.
(Szalai) These are examples premium cable providers selecting the best streaming
provider for its shows.
Premium providers
have an exceeding amount of power as streaming services vie to get popular
archived shows available on their services. A network like HBO also benefits
from the fact that it has a massive library of highly popular and renowned
shows which it could potentially licenses to VOD providers. (Szalai) Analyst Vasily Karasyov states the key difference: “Original scripted programming is what drives value
of a premium network." (Szalai)
Yet, premium
networks do not necessarily need to rely on licensing their content to VOD
providers in order to distribute their shows. Premium providers are now
beginning to offer their own streaming services. One major development was HBO’s
decision to create a stand-alone streaming service which would allow
subscribers to access original content similar to Netflix. (Steel) By doing so
this puts HBO in direct competition with other streaming providers. (Steel) It
is likely that other premium cable providers may follow suit with HBO in
creating their own online services.
I would
agree with the sentiment Pisharody shared that “HBO is more similar to Netflix
than it is to a traditional broadcast or cable network.” Neither relies on
advertising and both offer what can be referred to as niche content; that is
popular original programming which cannot be found on any other platform or
through another service. Therefore I believe that as streaming becomes the norm
the continued success of the premium networks may be reliant on whether they
can continue to produce shows people want.
http://www.bloomberg.com/news/videos/b/e6457415-0823-45e5-baef-0feafbd60f89
http://www.bloomberg.com/news/videos/b/e6457415-0823-45e5-baef-0feafbd60f89
References
How HBO's Over-The-Top Streaming Service
Can Shape The Network's Future. (2015, January 12). Retrieved February 7, 2015
Spangler, T. (2014, January 20). As
Netflix Rises, Subscriptions to HBO, Showtime and Other Premium Nets Shrink as
Percentage of U.S. Households: Report. Retrieved February 8, 2015.
History of Home Box Office. (n.d.).
Retrieved February 7, 2015, from http://www.fundinguniverse.com/company-histories/home-box-office-inc-history/
Pisharody, A. (2013, May 1). The Future
of Television: Will broadcast and cable television networks survive the
emergence of online streaming. Retrieved February 7, 2015.
Szalai, G. (2015, January 29). Starz
Steps up Global Monetization of Originals. Retrieved February 7, 2015.
Steel, E. (2014, October 15). HBO Plans
New Streaming Service, With Eye on Cord Cutters. Retrieved February 7, 2015.
Edwards, J. (2013, November 24). TV Is
Dying, And Here Are The Stats That Prove It. Retrieved February 7, 2015.
Michael,
ReplyDeleteHBO’s announcement of a standalone service means we are now even closer to a time when cord cutters will be able to separate entirely from a cable subscription without losing any of the programming they value.
There any many rumors that both Starz and Showtime will soon be joining HBO with their own standalone services but the success of their online channels could largely be effected by price. Netflix offers a monthly subscription for 8.99 a month if the premium channels stay in that ballpark they will be able to compete. (Munarriz)
Cable providers and cable networks are also taking notice of the public’s migration to online viewing. Both Dish Network and Sony have announced that they will be offering a subscription to online-only live TV and in October CBS announced that they too will be offering their own subscription streaming service that lets people watch its live programming past shows on demand. (Jesdanun) If someone were to combine one of these packages with a subscription to one of the premium channels or an of the other many streaming services such as Hulu or Amazon prime for less than their cable bill it wouldn't take much convincing to cut the cord altogether. Emily Steel of the New York Times agrees, “viewers have more options to pay only for the networks or programs they want to watch — and to decide how, when and where to watch them. Rapidly fading are the days in which people pay an average of $90 a month for a bundle of networks from a traditional provider.” (Steel)
Investment Banker Terence Kawaja thinks that the transfer from traditional cable to digital will be smoother than people anticipate, “the future looks like a happy marriage between traditional players where there will be little distinction between what was previously thought of as traditional liner and digital delivery.” (Yarow) I think that Kawaja is forgetting one key element. Bandwidth. The average broadband user goes through 29 gigabytes of data a month, in comparison, the top 15 percent of streaming video users go through 212 gigabytes of data month - more than seven times the average broadband user. (Kafka) Furthermore, last May it was reported that Netflix traffic accounted for 34% of North America's downloads. (Fitzgerald) As more and more people cut the cord internet service providers will need to improve their networks to keep up. I think we will see more battles over bandwidth usage and the debate over net neutrality and broadband access will become the center of attention again.
Works Cited
Munarriz, Rick. "Netflix at $8.99 Is Still a Bargain - DailyFinance."DailyFinance.com. N.p., 13 May 2014. Web. 09 Feb. 2015.
Jesdanun, Anick. "SpongeBob Online? Nickelodeon to Offer Internet Subscription." ABC News. ABC News Network, 29 Jan. 2015. Web. 09 Feb. 2015.
Steel, Emily. "Cord-Cutters Rejoice: CBS Joins Web Stream." The New York Times. The New York Times, 16 Oct. 2014. Web. 09 Feb. 2015
Yarow, Jay. "An Investment Banker Made This Epic Presentation On The Future Of TV." Business Insider. Business Insider, Inc, 06 July 2014. Web. 09 Feb. 2015.
Kafka, Peter. "Purge Pay TV, Binge on Data: Cord-Cutters Are Gulping Down Bandwidth." Recode. N.p., 14 May 2014. Web. 09 Feb. 2015.
Fitzgerald, Drew. "Netflix's Share of Internet Traffic Grows." Wall Street Journal. N.p., 14 May 2014. Web. 09 Feb. 2015.
Caitlyn Maio
ReplyDeleteOnline streaming is becoming a new evolution in today’s society, and cable TV is declining. I agree that people are unplugging and beginning to get rid of their cable services because they want to watch whatever they want during their own time. Time Warner Cable “lost 306,000 TV subscribers” and “24,000 broadband web subscribers too” (Edwards 1). With busy work and school schedules, most people like to use the weekends to catch up on their shows. I know I do. TV ratings are “falling across the board” and have been for years (Edwards 3). I also agree that now premium cable networks are starting to use the idea of streaming. Subscribers can now watch their shows online whenever they want, as long as they belong to a cable provider.
Since I’m an Optimum cable user, I use HBO GO all the time to catch up on certain shows. When I heard that True Detective was a great show and that I must watch it, I signed onto HBO GO and was able to watch the entire first season over break. Now I can’t wait for the second season to come out, and I definitely will be using HBO GO to watch it on my own time. There is also a change developing when it comes to premium networks using online streaming. Recently, HBO announced that it wants to begin “a stand-alone streaming service in the United States in 2015 that would not require a subscription to a traditional television service” (Steel 1). This will open up access to HBO GO for anyone and will become more competitive for its main rival, Netflix. Both companies are “battling for a new generation of viewers who increasingly pay only for Internet access” (Steel 1). At school and at home I use online streaming to watch most of my shows. Between HBO GO and Netflix, I barely use my cable. The only time I do use my cable is to watch The Tonight Show Starring Jimmy Fallon, but even that I can watch online if I miss it.
Caitlyn Maio Continued
ReplyDeleteFurthermore, I agree that soon other premium networks and companies will soon follow Netflix and HBO. CBS announced “its own subscription streaming service that lets people watch its live programming and thousands of current and past shows on demand,” and it will make shows like the Big Bang Theory and NCIS available the day after they’re shown (Steel 1). People like the convenience and easiness of online streaming and being able to choose what to pay for. The “cord-cutters” are expanding and starting to cancel their cable services more rapidly than people think. I think several people also like that they can pick which subscription they want as well. There are a ton of options developing besides HBO GO and Netflix. Hulu has a “premium service that costs $8 a month,” just like Netflix, and you can be an Amazon Prime member for only “$99 a year” (Steel 2). This proves that today viewers have “more power to create their own television bundles” on their own time, rather than pay for cable services (Steel 2).
In addition, I think that online streaming also allows people to become more engaging among social media. Even though some people may give away what happens during an episode of a show, social media can also help people become engaged and interested in starting a new series because it sounds so good through tweets and posts. “Millions of people take to Twitter to share their passions about their favorite programming in the heat of the moment” ("From Live to 24/7: Extending Twitter TV Engagement Beyond the Live Airing" 1). This can not only help networks build to their audience, but it can also help the growth of online streaming. People can use online streaming to watch a series they missed that they read about on Twitter or Facebook. Online streaming is becoming popular for this modern age because it not only connects us to our favorite shows, but it also connects us to other viewers on social media.
Works Cited
Edwards, Jim. "TV Is Dying, And Here Are The Stats That Prove It." Business Insider. Business Insider, Inc., 24 Nov. 2013. Web. 09 Feb. 2015.
"From Live to 24/7: Extending Twitter TV Engagement Beyond the Live Airing."
Nielson.com. Nielson, 15 Dec. 2014. Web. 09 Feb. 2015.
Steel, Emily. "Cord-Cutters Rejoice: CBS Joins Web Stream." The New York Times. The New York Times, 16 Oct. 2014. Web. 09 Feb. 2015.
Steel, Emily. “HBO Plans New Streaming Service, With Eye on Cord Cutters.” The New York Times. The New York Times, 15 Oct. 2014. Web. 09 Feb. 2015.
Mike,
ReplyDeleteI agree with your main point that although television and Cable subscriptions are decreasing rapidly, premium Cable subscriptions are not. I believe the statistics are there to prove it, so rather than getting into whether or not this is true, I would like to talk about why it is true.
First things first, the allowance of uncensored language, nudity, and graphic violence makes the shows much more realistic. The dramas keep you at the edge of your seat, the comedies make you laugh your ass off, and the action shows make you cringe with delight. To prove the TV-MA factor, in the past HBO has made deals with other channels, specifically CW, to play re-runs of some of its syndicated shows. The main two that come to mind are Entourage and Curb Your Enthusiasm. Both of these shows are adult comedies (although Entourage is also a drama) that use a lot of adult language. Watching these shows on the CW not only censored them and made them less funny, it added commercials at the most inopportune times.
This brings me to my next point, people are done with ads. Commercials are on the outs because of services like DVR and Tivo, as well as streaming services. “Netflix now has 50.7 million international subscribers paying for its streaming service, with 36.3 million paying subscribers in the United States,” according to Emily Steel from the New York Times. One of the main reasons that Netflix is so successful is that they take away the commercials, plus you can watch whatever episode you want whenever you want. Channels like HBO and Starz have done this too, with additions of HBO Go and Starz Play. Some of these premium channels have also begun to team up with streaming services. Georg Szalai from The Hollywood Reporter wrote that, “Starz unveiled a deal with Amazon, its first-ever U.S. subscription VOD content licensing deal with the company, for The White Queen.” He goes on to mention another deal with Netflix that will give them the rights to play Spartacus and Magic City. Showtime also released the show Dexter on Netflix a few years ago. Working with these streaming services can be beneficial to both companies. Szalai talks about the strategy by Starz saying, “In the case of The White Queen, Winokur and Thornton said Amazon seemed the better fit due to its user base. They said women using Amazon Prime would be a key audience for the show.”
HBO has gone a different route though. They are now creating a streaming service for all of their content, in which you do not need a subscription (so basically HBO Go without the subscription). The service will come at a price, but a cheaper one supposedly. It should create a huge competition with services like Netflix. Steel quotes Reed Hastings (chief executive of Netflix) in saying, “since 2011 it had aimed at HBO as its primary long-term competitor, especially for content.” We’ll have to wait and see how this goes, because it could actually hurt the number of HBO subscribers. I do think it will be a success for HBO though, and something other premium Cable channels may want to look into trying.
Finally, premium Cable channel shows generally have a longer lifespan. This has to do with a loyal fan base and the companies’ willingness to fund their shows. The basic Cable shows on Fox and NBC tend to have a lower budget and a faster hook if they’re unsuccessful. A show like Game of Thrones for HBO has the highest budget on television, but spending money has reaped its rewards, because Thrones is now one of the most popular shows out there.
All in all, I think premium Cable will survive and prosper as long as they stick to the content and strategy that has got them this far. As for television, I’m not sure it will ever die out completely, but I think subscription adjustments will continue to be made, and the numbers of channels may start to decrease.
ReplyDeleteWorks Cited:
Steel, Emily. "HBO Plans New Streaming Service, With Eye on Cord Cutters." New York Times. 15 Oct. 2014. Web.
Szalai, Georg. "Starz Steps up Global Monetization of Originals." The Hollywood Reporter. 29 Jan. 2015. Web.