Streaming Apps Services Dominate

Cable and satellite TV subscriptions have plummeted, as consumers move to internet-based “streaming” channels and platforms. Benefits to consumers may include no long-term contracts and lower overall costs, compared to their old cable or satellite subscriptions.

Competition from Netflix: Netflix.com began as one of the largest movie and TV show rental sites in the world, peaking at more than 221.84 million subscribers worldwide as of late 2021, capping off 15 years of growth. For a monthly subscription fee, users enjoy streaming an unlimited number of movies. Netflix’s business model initially was based on mailing DVD copies of movies to its subscribers. This was a costly business, involving multiple warehouses and massive postage and handling expenses. At a rapid pace, however, the firm invested in state-of-the-art technology to enable it to focus on streaming via the internet. While Netflix still supported DVD subscribers as of 2023, this is a minor part of its business. Playback of a Netflix streaming movie starts a few seconds after download begins. Subscribers instantly watch movies and TV episodes streamed over the internet.

The Netflix streaming content library includes media acquired through deals with corporations such as: ABC, Nickelodeon, Twentieth Century Fox, Paramount, Miramax, Lionsgate, MGM and CBS, among others. Additionally, through its Netflix Originals division, the company produces content available exclusively on Netflix, which continues to rack up growing numbers of Emmy nominations and wins (in 2021, Netflix reported 13 Emmy winning productions). The company invested about $17 billion in new film production in 2022. Netflix produced more than 500 original films in 2021 alone.

Netflix’s effort to shift to streaming video not only is cost effective, it is also positioned the company to take on cable channels such as HBO and Showtime. Operating on a business model dramatically different from those of cable TV channels, Netflix became a true web-based entertainment platform, highly competitive with traditional cable networks and systems.

However, the company’s fortunes dramatically shifted in 2022 when it reported back-to-back losses in subscriber count over several quarters, due to increasing competition from other streaming services, troubling global economic circumstances and heavy spending on content. The company is cutting costs (hoping to continue to develop high-quality content on a more efficient basis) and launched a “Basic with Ads” service level in November 2022, which includes an average of four to five minutes of commercials per hour for a reduced monthly fee. Netflix is also looking to change its licensing model that it pays to producers for original content from a percentage of the production budget (typically between 20% and 35%) to a flat fee.

Development of Lower-Cost Subscriptions and Online Video Streaming Platforms: In an effort to attract consumers who are not willing to pay for traditional cable and satellite subscriptions, many companies are offering stripped-down packages with limited programing. Some of these services are cable- or satellite-based, but many are delivered only via the internet. These services are offered by top cable, satellite and media firms including CBS, DirecTV, Hulu, Netflix, DISH and HBO. The competition is already intense, and others may jump into the fray. Business models and offerings are evolving rapidly as providers attempt to establish market share and attain profitability on these platforms.

DISH Network offers Sling TV, a moderately priced streaming internet-based service targeting young, mobile-intense viewers who refuse to subscribe to cable TV. Sling TV, which had 2.41 million subscribers as of November 2022 (down from 2.6 million subscribers as of November 2021), offers some of the most popular cable networks including the Food Network, HGTV, TNT, TBS, ESPN and CNN (but broadcast networks ABC, CBS, NBC and Fox are not included). Vital differences from cable TV subscriptions include no long-term contract, a vastly lower monthly fee (in exchange for a much smaller selection of channels), no credit check and no need for additional hardware. Sling is working to innovate more quickly, adding discovery+ to its list of streaming providers and rolling out Sports Scores, a listing of scores across many major sports while watching live content in 2022.

Meanwhile, streaming service YouTube TV had over 5 million subscribers as of July 2022, up from an estimated 4 million subscribers in 2021. Hulu with Live TV had 4 million in July 2022.

Roku, Inc. began by manufacturing home digital media products. The company’s digital media players connect users to streaming content, enable content publishers to build and monetize large audiences and provide advertisers with unique capabilities to engage consumers. The firm also offers the Roku Channel offering ad-supported video-on-demand in the U.S., Canada and the UK, which generates the bulk of the company’s revenue. Roku surpassed 70 million active accounts as of the end of 2022, up by almost 10 million users compared to 2021.

Perhaps the biggest in news in streaming video in 2019 was the launch of Disney+, which offers TV and movie programing from all Disney brands including Pixar, Marvel and Star Wars. The venture signed up 10 million subscribers on its first day and had 164.2 million as of November 2022. Disney pulled significant content from Netflix, losing $2.5 billion in annual fees, to preserve it for Disney+. The company has two additional streaming services, ESPN+ and Hulu (Disney, which previously owned a two-thirds stake of the streaming service, agreed to acquire the remaining third from Comcast in a five-year deal during which Disney will pay Comcast for Hulu content. The deal is valued at approximately $27.5 billion.). Disney expects Disney+ to reach 260 million subscribers by 2024.

CBS All Access is a streaming service that offers subscribers limited commercial or commercial free access to its programming, and is available in more than 90% of the U.S. CBS holds back certain key content from other streaming providers.

In August 2021, AT&T spun off its DirecTV, AT&T TV and U-verse businesses into a single entity called DirecTV. AT&T has a 70% stake in the new company, with the remaining 30% owned by private equity firm TPG Capital, which paid AT&T $1.8 billion. Existing DirecTV content continues to air, including NFL Sunday Ticket and HBO Max.

Apple is also spending heavily to produce TV programming, and its budget is likely to grow quickly. Apple TV+ launched in November 2019, undercutting several of its rivals on price (one-year access is free to customers buying a new Apple device).

Amazon Prime Video offers a vast selection of titles instantly. The company has expanded its video services to more than 200 countries and territories, and offers live NFL Thursday Night Football games in the U.S. Amazon’s budget for production of unique content was an estimated $15 billion in 2022 in an effort to compete with Netflix (with a budget of about $17 billion for that year). Amazon is having a dramatic impact on the streaming films sector, with its big budget productions. It paid $250 million for the rights to produce new Lord of the Rings episodes and is investing a total of $715 million in the project.

However, cable TV is far from dead. Paramount Network has a massively successful series called Yellowstone, which was enjoying its fifth season as of 2023. In addition to cable, the show is licensed for viewing on certain streaming services, including Amazon Prime Video, Hulu and Sling, but viewers may be required to pay extra fees or have a premium level of service.

Comcast owns NBCUniversal and launched the Peacock streaming video service in July 2020. The service offers over 15,000 hours of NBC programming and movie classics, plus new original content such as a new Battlestar Galactica and Brave New World starring Demi Moore. As of the second quarter of 2021, Peacock has 54 million subscribers.

DirecTV’s HBO Max launched in May 2020 and was previously owned outright by AT&T, before the August 2021 spinoff of DirecTV, AT&T TV and U-verse. The service includes original HBO content as well as network TV favorites such as Friends and The Big Bang Theory, plus classic films including Casablanca and When Harry Met Sally. The big news for HBO Max is the agreement with Warner Bros., in which the studio’s latest major film releases, such as Wonder Woman 1984, are available for streaming at the same time they open in theaters.

Streaming one hour of a standard movie via Netflix can use 1 gigabit of bandwidth at standard settings. However, Netflix offers a reduced bandwidth setting that can reduce this by 70% to 300 megabits. High-definition movies can require up to 3 gigabits of bandwidth per hour. These requirements create both headaches and revenue opportunities for internet service providers of all types, from cable to DSL to smartphone service. Simply put, downloading or streaming a movie uses up vast amounts of bandwidth and places great strain on internet providers' infrastructure, whether wired or wireless.

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