Phillipian Commentary: Streaming Services

Over the last decade, the video streaming industry has exploded. At first glance, the rise in streaming video competitors is the perfect definition of market disruption: it provides users with more choices, lower prices, and better customer service than consumers traditionally received from entrenched cable TV companies. In fact, a survey in 2015[a] revealed that 20 out of 24 TV service providers were given the lowest rating possible on a customer satisfaction report. Streaming services are a perfect example of how disruption and innovation are supposed to work.

But as consumers are forced to pay for more and more subscriptions to get all of the content they’re looking for, they’re not only getting frustrated by the growing costs—which defeats the whole point of cutting the cord—but they’re also frustrated by the experience of having to hunt through an endlessly shifting sea of exclusivity arrangements and licensing deals that make it difficult to track where your favorite show or film resides this month. After all, after having paid ten dollars a month for a Netflix account, most people would become understandably upset to find out that the shows they actually want to watch are not available on the platform. And, as such, these consumers are more likely to turn to illegal methods such as piracy. Some sites provide high definition recordings of a wide range of shows, all easily accessible for free (so long as the user deals with the pop-up ads). A recent study conducted by Broadband Genie predicts that the percent of users “often” or “occasionally” using pirated sites to consume entertainment could double from 18 percent to 37 percent if exclusive content becomes spread across too many different sites. Clearly, this would be detrimental to the industry, as it takes away the revenue rightfully earned by the producers of these shows and gives it to pirated websites in the form of ad revenue instead. In the long run, this would reduce the incentive for producers to spend time creating new shows. If they don’t expect to gain much from a new venture, they simply won’t produce it. We are already witnessing this phenomenon to a certain extent; Netflix Originals, an investment to create originals shows, has largely failed to deliver the sustainable advantage that has been hoped for. Despite[b] some popular shows such as “Black Mirror” and “Stranger Things”, its revenue growth has consistently lagged far behind its expenditure growth. Over time, this leads to more stale content and price hikes from streaming companies as they try to increase revenue—something none of us want to see.

Ironically, the glut of video choices—more specifically the glut of streaming exclusivity silos—risks driving users back to piracy. Studies[c] predict that every broadcaster will have launched their own direct-to-consumer streaming platform by 2022. Most of these companies are understandably keen on locking their own content behind exclusivity paywalls, whether that’s HBO Now’s ‘Game of Thrones’, or CBS All Access’s ‘Star Trek: Discovery’.

At the end of the day, these streaming services won’t cool down anytime soon. And no matter how much we may want to encourage artistic creativity, most of us would much rather prioritize watching our favorite shows of different platforms. Although ideally, we might be able to limit the increasingly fragmented field of streaming services by boycotting certain shows and forcing their studios to abandon their independent streaming ventures, this is both unrealistic and unfair to the streaming services. As of now, media consumers are stuck between a rock and a hard place. Without resorting to piracy, they have no way of demonstrating their dissatisfaction with the streaming industry. But with it, they run the risk of disincentivizing producers and stifling creativity. How they act will determine the future of these streaming services—and perhaps even change the media industry as a whole.