If you’re a Star Trek fan, CBS just made your day.
It announced that it’s bringing back a Star Trek television series.
But there’s a catch…
In a sign of the changing times in the TV industry, the only way to see the new series will be to subscribe to CBS All Access – the company’s paid video streaming service that costs $5.99 a month.
As you may know, the video streaming market is huge – and growing. It certainly qualifies as a disruptive force, as it’s a direct threat to incumbent cable companies, with viewers increasingly “cutting the cord” on their cable programming.
At the same time, though, it’s also a huge opportunity for cable companies because many of them not only own the programming, they also provide the internet connections that enable streaming to reach homes. And nobody wants to cut that cord!
But as the streaming industry grows, it presents a challenge to other streaming companies, content producers, and consumers’ wallets.
The CBS announcement gives a glimpse into what it might mean…
CBS Fires Off Two Shots
Before blockbuster franchises like Harry Potter and Twilight, Star Trek was the original franchise. Indeed, for a time in the 1990s, Star Trek was even called the franchise within Paramount Studios.
When Viacom Inc. (VIA) split up its company in 2014, the franchise split. Paramount kept the movie rights and has since produced two successful Star Trek films. CBS Television kept the TV rights, and it’s getting back in the game.
But CBS’ decision to only stream the new series is a direct shot at two parties:
- Cable Companies: Any high-profile programming that isn’t available on cable is a direct threat to cable. After all, if the shows you want to watch are increasingly available elsewhere, why give your money to a cable company, which you probably hate anyway?
- Netflix Inc. (NFLX): Netflix is the undisputed king of streaming, with over 42 million customers in the United States and nearly 26 million more around the world. The company pioneered the market as it exploded from a humble mail-order video rental service to today’s $47.4 billion-market cap behemoth. Netflix grew so fast partly because it was the only game in town for a long time. Not only for customers, but for programmers, too. If a producer wanted to have a show profit from the streaming trend, selling it to Netflix was by far the best way to do it.
Of course, CBS isn’t the only company deciding to take advantage of the streaming trend…
It’s Television… But Not as We Know It
All the big boys are jumping into this new way of watching television:
- Amazon.com Inc. (AMZN) is leveraging its massive database of Prime customers and investing in its own original programming.
- Hulu, currently an also-ran in streaming, is making original programs, in addition to benefiting from being owned by massive programming companies – Comcast Corp. (CMCSA), Twenty-First Century Fox Inc. (FOX), and Walt Disney Co. (DIS).
- Even Google Inc.’s (GOOGL) YouTube is getting into the paid streaming business, with ad-free and original programming now available.
Other streaming companies are mostly offering content produced by others, or of relatively low value, but you can bet they’ll produce more content as competition heats up.
And the companies behind some of these other streamers? Microsoft Corp. (MSFT) with VUE 360, DISH Network Corp. (DISH) with Sling TV, Apple Inc. (AAPL) with iTunes, and even Wal-Mart Stores Inc. (WMT) with VUDU.
MUST-SEE: Trump’s Financial Disclosure Statement
This could be the biggest Obama “scandal” EVER…
It has to do with a secret that he and the Pentagon kept hidden at 9800 Savage Rd., Fort Meade, Maryland, for his ENTIRE presidency.
You won’t want to miss THIS.
The CIA spends billions of dollars to keep scandalous stories under wraps. So we wouldn’t be surprised if they wanted this page taken down immediately.
Click here for the shocking truth.
How’s that for a few giants to upend a new industry?
Netflix Prepares for Battle
Netflix is aware of this trend, of course. Indeed, it was ahead of these players with its own original programming, including high-quality, successful shows like Orange is the New Black.
But just because it’s aware of the trend doesn’t mean it’s not threatened by it. Netflix faces challenges on two fronts – programming costs and customer acquisitions.
It seems like a paradox, but the increased amount of original programming will drive up the cost of other programming. Why?
~ Programming: Although supply is rising, demand is rising faster. That is, streaming companies that are competing for the best, exclusive programming will be forced to bid against each other for them. Even programming produced by others, such as TV reruns and movies, will become more expensive, as each company strives to offer everything their competitors do, and more.
~ Customer Acquisition: This problem is more obvious. Until just a few months ago, if you wanted to stream movies on demand and watch high-quality original programming on the same service, you signed up for Netflix – it was the only quality choice.
But by this time next year, there will be at least four, and maybe up to 10 more services, all offering roughly the same movies and their own original programming. Few consumers will want to sign up for more than one or two of these services. After all, one of the attractions of streaming is to cut your cable bill. But what’s the point if you’re sending just as much to four or five streamers, especially since much of the content is the same from all of them?
So who’ll win – and what will the future of TV look like?
Not Enough TV?
In short, there’s room for many winners.
As Netflix CEO Reed Hastings said earlier this week, there isn’t enough TV! Now, that may seem unbelievable, but the truth is that consumer spending on entertainment has grown faster than inflation and faster than household discretionary income for many years. That’s why cable companies were able to jack up their rates for so long!
But eventually, something will have to give. Even with higher entertainment spending, there aren’t enough customers to support all of these companies. And certainly not to Netflix-like valuations.
So what are they doing?
~ Comcast: Its reach is spread far and wide. The company owns cable TV, internet assets, streaming businesses, and programmers. It stands to win, whatever the outcome.
~ Time Warner Cable Inc. (TWC) and Cablevision: These companies, which don’t have as much programming, are selling out to those who do, or those with the scale to acquire programming.
~ Amazon: It’s using streaming to forge even closer links with its customers, thus sparking higher sales of other non-television products.
Companies without the ability to do these things are most at risk. And that takes us back to Netflix…
The Outlook for Netflix… And America’s Viewers
With its large customer base and limited business model, Netflix has the most at risk and the fewest levers to mitigate that risk.
It will have to find another act – and soon – or its stock will drop to the point where it will be an attractive potential acquisition for another company.
For consumers, the news is mixed, too.
On the one hand, we’re in a golden age of television programming – something that’s likely to continue as streaming companies battle with each other and cable companies for your time, attention… and money.
On the other hand, finding quality programming will no longer be as simple as having cable and maybe just upgrading to HBO. The best choices will all have separate price tags, and gaining access to multiple services could be more expensive than cable ever was!
To living and investing in the future,