The Pandemic 'Turbo Charged' Streaming; Customers Paid the Price
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How the Pandemic ‘Turbo Charged’ Streaming While Customers Paid the Price
American viewers have hit an all-time high of video services, which means more bucks spent on at-home entertainment each month
The coronavirus pandemic has pushed streaming adoption to new heights — and in the process, emboldened services to seek more money from their entertainment-starved viewers.
Hub Entertainment Research, a firm that tracks media and entertainment trends, recently looked at how many services American consumers have. The data — which tracked adoption of paid streaming services, including companies offering live TV streaming, as well as ad-supported services — showed the average American viewer has 60% more services than they did just two years ago.
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“We’ve seen the number of providers per respondent rise to an all-time high during the pandemic. The average respondent had 4.8 services, ” Hub principal analyst Jon Giegengack said. “That was going up anyway, but the pandemic turbo charged it.”
This isn’t a shock, Giegengack said, when you consider new services like NBCU’s Peacock and HBO Max have debuted in the last few months; add to that the release of Apple TV+ and Disney+ within the last year, and the continued rise of free streaming services like Tubi, Pluto TV and Xumo. Even established juggernauts like Netflix have seen record growth so far this year, with Netflix adding 26 million subscribers during the first half of 2020 — only 2 million less than it added all of last year. With not much else to do beyond staying at home, the streaming spike makes a lot of sense.
The jump has also coincided with a surge in customers dropping their cable and satellite packages. Viewers simply haven’t felt they’re getting enough bang for their buck, with Hub data finding the average American paying for a cable or satellite package tends to use only about 15% of their available channels, Giegengack said.
Instead, customers have increasingly looked toward streaming services that offer live TV — Hulu with Live TV and YouTube TV being the two most prominent. These virtual multichannel video programming distributors, or VMVPDs, initially offered relatively cheap bundle packages. The reason was clear: They were trying to win over customers who had become disenchanted with cable and satellite.
“In the early days, the companies on the VPMD side were selling it at, essentially, a discount,” Bruce Leichtman, president of Leichtman Research Group, said. “All of them had different reasons for selling milk ‘at cost.’ It’s not unlike a supermarket, where they’re selling something very low. But like other products and services, over time, that adjusts.”
Those early days have quickly faded. YouTube TV debuted at $35 a month in 2017; Hulu’s live TV option launched the same year at $40 per month. But after another price hike this past summer, YouTube TV now runs customers $65 per month. Hulu with Live TV is up to $55 per month, after its own price hike late last year. (These increases put YouTube and Hulu in-line with other VPMVPDs like AT&T Now, which starts at $55 per month.) The hikes go hand-in-hand with more channels, Hulu and YouTube have said. But the fact is, customers are paying more to stream content more than they ever had before.
Take the 4.8 figure Hub found. If one of those is a live TV streaming service, customers are already working from a $55 baseline. Add in the cheapest options for Netflix and Disney+, the two most popular streaming services, and that combo is up to $71 per month. Maybe customers round out the last 1-2 services with a few freebie streaming options like Pluto TV. That still comes out to $852 per year. And if those same customers are mixing in a few months for other paid streaming services throughout the year, they’re easily looking at $1,000 and up.
From the VPMVPD side, Leichtman said there’s a push to strike a balance, where the price inches up but is not high enough to scare off customers. “No barrier to entry means no barrier to exit” for customers, he said. Customers can sign-up easily, but they can also ditch their service just as fast.
But with YouTube TV and Hulu’s prices now in-line with other live TV streaming options, and still below most cable and satellite packages, customers are in a jam: either accept the increased price of streaming or drop their service. A return to cable or satellite isn’t a viable option for most. (Pay TV providers have lost a combined 10 million customers over the last two years, Leichtman pointed out.) The bet is, most customers will suck it up and pay to keep their favorite shows — especially during a pandemic. And SVODs like Netflix may be making the same bet, with analysts anticipating Netflix may increase its prices again in the near future.
The end result is people are streaming more and paying more for it than ever before — and that trend doesn’t look to be slowing down anytime soon.