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Tags: tv | industry | question | media

TV Industry's Biggest Question: What Is TV, Exactly?

remote control changing channels while watching tv in background
(Brad Calkins/Dreamstime)

Tara Lachapelle, Bloomberg Opinion By Friday, 08 February 2019 09:30 AM Current | Bio | Archive

What is TV? 

I’m serious, how would you define it? The definition of television entertainment is changing, and it now means different things to different people. That’s led the media industry — dominated by companies such as Walt Disney Co., Comcast Corp.’s NBCUniversal and AT&T Inc.’s WarnerMedia — into an existential crisis.

For the more than 90 million Americans who subscribe to traditional cable packages, TV may still be thought of as channels with assigned numbers, which you enter into overly complex remotes and which air programs at scheduled times with regular commercial breaks. But to many others, TV now means on-demand web-video services such as Netflix, watching when you want and not necessarily doing so in front of a large screen in the living room. For some, TV commercials are now unthinkable interruptions that they’ll pay to avoid, while others will tolerate ads if it means free streaming. And as for some of the younger viewers whom traditional media companies most fear, TV isn’t even a thing — they’d rather watch videos on apps like Instagram and YouTube, or play “Fortnite.” 

Nobody really knows which streaming model will work in the long run, and so the industry has splintered along the lines of live programming versus on-demand viewing, and ads versus no ads. In an informal survey I conducted of 100 people through social media, 64 percent said that they prefer on-demand services like Netflix. As for those who picked live TV, many said they did so mainly because they want sports programming but otherwise prefer on demand. 

If my little survey is at all representative of the broader U.S. audience, it’s bad news for companies like Comcast and Dish Network Corp. Comcast’s NBCUniversal division plans to launch a “free,” ad-supported streaming product for people who already pay for traditional cable. (An ad-free version of the NBC app will also be available for a charge.) As for Dish, its $25-a-month streaming product, Sling TV, is geared toward live TV with ads as well. The same goes for Pluto TV, a free service that Viacom Inc. has agreed to acquire. (Pluto’s dashboard actually looks just like an old TV guide channel.) And in an interesting move, Hulu is lowering the cost of its basic plan with ads by $2 to $5.99 a month, but it’s hiking the price of Hulu + Live TV by $5 to $44.99 a month — a sign it thinks some customers place that much more value on live programming.

Meanwhile, AT&T is trying to do it all — capture the live-TV fans and the on-demand binge-watchers. But this approach is confusing for investors and customers alike. AT&T already owns DirecTV Now, which for all intents and purposes is an app version of cable TV. The margins have been slim to nonexistent, so DirecTV Now had to raise prices and end promos, resulting in the exodus of 14 percent of its subscriber base last quarter. Later this year, AT&T will launch yet another app through its new WarnerMedia division, anchored by HBO and the other assets it inherited through last year’s Time Warner acquisition. Originally, it was billed as a subscription on-demand product that will have three pricing options, but the company recently said some of the content will be ad-supported. 

These few examples are emblematic of the dizzying assortment of video apps available to cord-cutters. Of course, the media giants would love to just copy what Netflix has so beautifully built, but it’s not a sustainable business model for them.

The soon-to-arrive product that’s most similar to Netflix would seem to be Disney’s. Later this year, it will sell a service called Disney+, a subscription video-on-demand product for its in-house brands, including Pixar, Marvel and Star Wars. (Disney is expected to unveil it during an April 11 investor conference.) Details have been scant, but we know the app will be cheaper than Netflix, which makes sense given that it will feature fewer movies and TV shows and less diversity of content than what’s found in Netflix’s library.

And speaking of Netflix, my survey takers see more value in the service than what it currently charges. When asked what’s the max they’d be willing to pay for Netflix, the average response was $19 a month; Netflix’s standard fee is $12.99. I guess a silver lining for the rest of the industry is that these respondents overwhelmingly don’t see Netflix alone as meeting all their TV-entertainment needs.

But while the media giants have come up with all sorts of complex ways to try to be competitive in streaming, they’re forgetting Netflix’s most redeeming quality: simplicity.

Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.

© Copyright 2022 Bloomberg L.P. All Rights Reserved.

Media giants don’t know whether live TV or on-demand content will rule the future of streaming, so they’re just throwing darts.
tv, industry, question, media
Friday, 08 February 2019 09:30 AM
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