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Netflix increasing price as it continues to invest heavily in content

Netflix increasing price as it continues to invest heavily in content

Netflix recently announced that it is increasing the cost of its standard plan by $1 (to $14 per month) and its premium tier by $2 (to $18 per month). The service’s most basic tier, however, is remaining just $9 per month. A price hike during a pandemic, and right before the holidays, could be viewed as less than ideal timing, but the leading streaming platform hasn’t raised prices since January 2019 and continues to invest in original, exclusive content – it’s been estimated that Netflix has allocated more than $17 billion in 2020 alone to secure more content.

Last year, Netflix acknowledged that video games like Fortnite could be a bigger long-term threat to the company than competitors like Hulu or HBO Max. To that end, the platform has invested more in interactive content like Bandersnatch and game-based content, including the documentary High Score and series like Castlevania, The Witcher and Assassin’s Creed. CEO Reed Hastings has also said that entering the video game space directly is not out of the question.

For the immediate future, Netflix is taking a chance by raising prices, potentially risking its position as a staple for streaming households. Not only is the streaming service under more pressure from newcomers like Disney+, Peacock, HBO Max, and Apple TV+, among others, but Interpret’s New Media Measure® indicates that increases in price are one of the main reasons for cancellation, just behind watching it less. When you combine that data point with the fact that over a third of Netflix’s subscriber base in the US is spending less on entertainment overall because of COVID, the likelihood of Netflix having reduced user growth or losing some customers in the months ahead goes up.

Some amount of churn is natural for any streaming platform, especially one as big as Netflix – it expects to have around 200 million subscribers globally by the end of the year. Netflix enjoyed back-to-back quarters of higher growth earlier this year during the pandemic but recently saw a slowdown. Nonetheless, investors believe that Netflix’s decision to raise pricing was a prudent one, as shares rose 5% the day after the announcement.

Apple TV+ coming to Xbox and PlayStation consoles

Apple TV+ coming to Xbox and PlayStation consoles

Like Disney, Apple has come to realize the importance of building a strong foundation in the streaming marketplace. In recent months, the company has made a bevy of moves to sign exclusive content for Apple TV+. On the heels of exclusively streaming Greyhound, starring Tom Hanks, signing Will Smith for Emancipation, and first-look movie deals with both Leonardo DiCaprio and Martin Scorsese, Apple has streamed On the Rocks featuring Bill Murray, locked down the Peanuts franchise, signed a new comedy series, Platonic, starring Rose Byrne and Seth Rogen, and picked up Jon Stewart’s first show since leaving The Daily Show. All this while extending its free first-year trial for iOS device purchasers an additional three months, through February 2021.

While some smart TVs and current video game consoles have not offered the Apple TV+ app, Apple is looking to change that. On time for the launch of the PlayStation 5 this November, Apple TV+ will become available on both PS5 and the existing PS4, which has sold through an impressive 113 million units worldwide. Similarly, it has been officially announced that Apple TV+ will be headed to both Xbox One and Xbox Series X/S consoles when Microsoft launches its new gaming systems this month.

There’s been no word on Apple TV+ coming to Nintendo Switch and its installed base of more than 65 million, but Nintendo has not offered its users a dedicated Netflix or Disney+ app yet either, instead only offering Hulu and YouTube on the popular gaming system.

Expanding support for Apple TV+ to gaming consoles is a smart move for Tim Cook and company, as the new generation of consoles hits the market. Many viewers today (especially gamers) expect to be able to consume entertainment content on whichever device they happen to be using at any time of the day. Interpret’s New Media Measure® also shows strong overlap between current Apple TV+ subscribers and console ownership, especially PS4 at 43%. Moreover, there’s plenty of room for Apple to capture more subscribers from the gaming crowd, as just 10% of Xbox and PlayStation owners subscribe to Apple TV+ at the moment.

Broadband providers are using TiVo to hold on to cord-cutting consumers

Broadband providers are using TiVo to hold on to cord-cutting consumers

At the turn of the century, TiVo introduced the world to the DVR and went on to lead the market for many years. In the two decades since, the television market has evolved significantly, affecting both the DVR brand and providers of traditional pay TV services. The decline of traditional pay TV and the rise of streaming services has been a challenge for both. With an increasing number of consumers taking broadband – but not TV services – from their provider, operators are losing incremental video revenues and their service bundles, a key strategy for attracting and retaining customers.

For its part, TiVo has undertaken several innovations over the past few years to adapt to the new normal in video. It introduced its own competitor to devices like Roku and Amazon’s Fire TV, announcing the TiVo Stream 4K earlier this year. More recently, TiVo and several of its cable operator partners – RCN, Grande Communications, and Wave Broadband – announced that they are working together to capture customers. These providers will bundle the TiVo Stream 4K with certain tiers of their broadband internet services, offering it for free for the first year of service and for a fee of up to $1.49 per month for the second year. The bundles also incentivize customers by giving them $10 off four months of Sling TV service.

For broadband providers, the partnership gives them a video play at a time when consumers’ interest in streaming is at an all-time high. For TiVo, broadband providers offer a unique distribution channel, one that is not dominated by market leaders Roku, Amazon, and Apple.

Dave Shull, TiVo president and CEO, commented at the time that the new product is “symbolic of our company’s transformation from a well-loved DVR provider to a pioneer in the streaming market.” The $50 HDMI dongle-based device is powered by Android TV and supports HDR, Dolby Vision and Dolby Atmos. It enables casting as well, letting users cast to their TV from their phones.

It’s early days for TiVo in the streaming marketplace, but at the moment adoption has been slow, with just a fraction of the US purchasing the TiVo Stream 4K this year, according to Interpret’s New Media Measure®. Bundling with more operators could be one avenue to pursue, but it’s also important to recognize that TiVo has been operating its own ad-supported streaming service, TiVo+ for a year, and the new streaming stick does give the company a way to expand its ad business.

As theaters nosedive, viewers are increasingly paying to rent or purchase movies digitally

As theaters nosedive, viewers are increasingly paying to rent or purchase movies digitally

October 2020 may go down in history as a turning point for traditional movie theaters after more than a century of operation. Cineworld, which operates the biggest theaters in the UK and Ireland and the second-biggest (Regal Cinemas) in the US, announced it would consider shutting down all its theaters. Likewise, America’s biggest movie theater chain, AMC, said recently that its cash resources would be all but gone by early 2021, and its future is uncertain.

The combination of most movie-goers staying home during the pandemic and Hollywood studios pushing back major releases like James Bond film No Time to Die has put the theater industry in a very precarious position. At the same time, most viewers have turned their attention to streaming platforms like Netflix, Hulu, Disney+ and others.

In light of massive COVID-driven disruptions to its parks and theatrical businesses, Disney, in particular, has announced a restructuring around its burgeoning SVOD business. The new Media and Entertainment Distribution division will focus on original content for streaming and how to best monetize the at-home audience.  “Given the incredible success of Disney+ and our plans to accelerate our direct-to-consumer business, we are strategically positioning our Company to more effectively support our growth strategy and increase shareholder value,” Disney CEO Bob Chapek said.

After testing the direct-to-digital waters with the premium release of Mulan on Disney+ in September, Disney intends to forego cinemas with its upcoming animated flick Soul, which it will bring directly to Disney+ on Christmas Day – this decision “shocked” the International Union of Cinemas (UNIC), representing European cinema operators.

“Theaters will return when movies begin to flow again out of Hollywood, but the business of movie distribution will likely be very different,” said Brett Sappington, Vice President at Interpret. “Studios will have significantly more negotiating power over theaters and control over distribution options with direct-to-consumer streaming. Theaters, one of the last bastions of traditional distribution, will now have to find a new place and role in order to survive.”

While cinemas are grappling with a crisis, it makes sense for big studios to go direct to digital. Interpret’s New Media Measure® shows that year-over-year from Q2 2019 to Q2 2020, the number of movies seen in a theater fell about 65%. Meanwhile, from Q1 to Q2 2020, there was a more than 70% jump in US viewers renting movies on streaming services, and an increase of more than 60% for digital movie purchases. Always a strong studio revenue driver in pre-pandemic times, the home entertainment experience is for now the only show in town.

Google makes aggressive streaming push with new $50 Chromecast device

Google makes aggressive streaming push with new $50 Chromecast device

For seven years, Google Chromecast has made it easy for consumers to mirror entertainment content from their phones and browsers to their big screen TV. Without a remote control or an onboard user interface, however, the user experience and value proposition has been quite different from competitors like Roku and Amazon’s Fire TV devices. The company is looking to change that this month by introducing a brand-new Chromecast that resurrects the Google TV interface and comes with a remote for easy access to apps without a smartphone (although regular casting functionality is still possible). Early impressions in the media have been largely positive.

Chromecast with Google TV represents a renewed push from Google in the streaming market. Competitively priced at just $50, the new Chromecast offers support for 4K HDR video along with Dolby Vision and Dolby Atmos for home theater enthusiasts. The remote also ties in nicely with Google’s growing interest in the smart home industry, as users can bring up Google Assistant with one button to control smart home devices on the user’s network or simply to search for content across apps by speaking.

Moreover, the remote features a dedicated Netflix button, which conveniently allows users to take advantage of Google’s new marketing partnership with Netflix – offering the new Chromecast with 6 months of Netflix for just $89.99. Google separately offers the new Chromecast for free to new customers of YouTube TV.

The streaming device market is highly competitive with Amazon, Roku, Apple and others fighting for market share. Interpret’s New Media Measure® indicates that Roku leads the market, while Chromecast adoption lags behind Apple TV and Amazon Fire TV. Streaming devices from TiVo, Nvidia, and others are also present in the market but with smaller installed bases.

While only 7% of US consumers currently use Chromecast, a new and improved device that puts an emphasis on the leading video subscription service (Netflix is approaching 200 million users worldwide) could give Google a boost; Interpret data also reveals that 65% of current Chromecast users in the US subscribe to Netflix, so there’s clearly a strong affinity for the service with the Chromecast audience.

Quibi reportedly mulling sale just six months after launch

Quibi reportedly mulling sale just six months after launch

Quibi, the short-form mobile video service launched six months ago by Jeffrey Katzenberg and Meg Whitman, hasn’t been able to find the traction its founders were hoping for, and is reportedly considering a number of “strategic options” currently, including an outright sale, as reported by The Wall Street Journal. Although Quibi is well-funded, having raised over $1.75 billion, its “quick bite” format hasn’t fully resonated as a subscription service, and the company is expected to see only about 2 million customers this year compared to its initially projected 7.4 million for the first year.

Quibi finds itself in a market where people are accustomed to watching short videos on YouTube, TikTok, Snapchat, etc. for free, and yet its service has ads and also charges $5 monthly (or $8 monthly for the ad-free version). Katzenberg and Whitman were clearly onto something at the start of their Quibi journey, because many young people do watch a lot of short-form videos – they just don’t believe in paying for that content. According to Interpret’s New Media Measure®, the 18-34 demographic that advertising executives continually chase watch more short videos than any other age bracket in the US. Specifically, the 18-24 age group watches 6.2 hours of short videos per week, while the 25-34 age group watches 4.8 hours of short videos each week.

“In many ways, consumer data reinforced the Quibi premise. Young consumers were increasingly viewing massive volumes of short-form content on mobile devices,” said Brett Sappington, Vice President at Interpret. “However, industry examples in short-form video suggest a different story. Several players have attempted subscription short form without success. In fact, YouTube had both original content and the ability to directly promote its YouTube Premium service to virtually all short-form video viewers, and that still wasn’t enough. Even at a low price, consumers have to perceive an incremental value for a service to be successful. So far, consumers are fine with what they get for free.”

For the subscription video market, procuring the right content is crucial – Netflix, Disney, Hulu, and others are all pursuing exclusive content strategies. Notably, Quibi owns none of the content it offers. Despite Quibi winning multiple Emmys, ABC host Jimmy Kimmel mocked the service as the “dumbest thing ever to cost $1 billion.”  Quibi can still turn things around, possibly by leaning into ad-supported content without the need for a subscription. One thing’s certain: it would be foolish to underestimate Katzenberg and Whitman.